SLC Agrícola S.A. (SLCE3) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to this public meeting we hold annually at SLC Agrícola. This year, we bring the topic, the best in agriculture. I'm Rodrigo Gelain, Financial Manager and Investor Relations Manager at SLC and will be your host. But before we continue, I would like to reinforce that in our studios, we are strictly complying with all safety protocols set forth by the authorities. For the opening remarks of our event, I would like it over to Mr. Eduardo Logemann, the Chairman of the Board at SLC Agrícola. Good afternoon, Eduardo, this stage is yours.

Good afternoon, everyone. Welcome to the SLC Annual Meeting. It's a pleasure for me to address you, shareholders, investors, ladies and gentlemen and everyone watching us today. For us to get to the results we achieved in the 2021 season record numbers, more than BRL 4 million. We had a long history, and I want to share a bit of that story with you. My grandfather, Frederico Jorge Logemann arrived in Brazil in the early 1900s. And in 1945, almost 77 years ago, he founded Schneider Logemann, that today became the SLC Group. He began with a small plant of ag implements. We had a mill for wheat and corn, and we grew. In Brazilian agriculture, the Logemann family today, the controller of SLC Agrícola and SLC Machines, the main 2 companies of the SLC Group, we create a first self-propelled combine in Brazil. At the time, the Brazilian combined market were 13 machines. We produced 1 and imported 12. The ag market grew with soybeans, with corn, with wheat, cotton arrived in the late '70s, early '80s, and SLC has always been present. Another very important landmark was in 1977 with the establishment of SLC Agrícola, a company from the Schneider Logemann Group, today, SLC was -- had a spin-off to dedicate to the production of grains at the time. So it was founded in Horizontina. And in the year 2000s, it moved to Porto Alegre, where we have our current headquarters. And that's how SLC grew. We began with a little more than 5,000 hectares. And when we went public, we were one of the first ag companies to go public in Brazil. We already planted 117,000 hectares of soybean, corn, cotton, wheat and some other grains at a lower scale. When we decided to go public in 2007, that was key for the growth of SLC Agrícola, a very fast growth, I should say. Today, we are present in 7 Brazilian states, 22 production units. Our headquarters are still in Porto Alegre, one of the largest, but perhaps the best producer of grain and fibers in Brazil, very high yield. Our innovation center is diversifying and growing. We are investing heavily to become increasingly more modern during the pandemic so that you understand. We grew 46% with the acquisition of Terra Santa And the inclusion of the Xingu area, 675,000 hectares, and we are proudly one of the best grain and fiber producers in the country. So SLC achieved the record results we just saw yesterday at our Board meeting and today, with the posting of our results to our shareholders, the press, consultants and analysts. These are my initial remarks for this event. I hope you enjoy it. You will learn more about our company, and enjoy this afternoon. We're going to have a Q&A session after the presentations of our directors. Thank you very much, and I turn it back to our host. Thank you.

Thank you, Eduardo, for your message. I would like to say that in the studio I have Aurelio Pavinato, the CEO of SLC; Ivo Brum, the CFO; and Investor Relations Director, Alvaro Dilli, HR Sustainability and IT Director; and Frederico Logemann, our Innovation and Strategic Planning Head. A very important team in line with the importance of our guests. As you know, the topic of our meeting is the best in agriculture. Besides presenting our results, we will talk about relevant topics like strategies, the fertilizer and commodities market objectives, deliveries in innovation, ESG and what we can expect for the future. After presentations, we will have a second moment, during which we will answer questions that can be sent through our WhatsApp number, through the QR code call you can see on the screen or directly online for those watching us via Zoom. Well, I would like to start with our presentation, and I turn it over to Pavinato. Good afternoon, Pavinato. Over to you. Thank you so much.

Good afternoon, everyone, all our investors, analysts, everyone watching us today. A very important day to us where we are announcing last year's results. You saw and will see that these were extraordinary results. But most importantly, we want to show you how prepared we are for the future. You know that investors do not count on the past. They count on the future. And SLC has an ability to deliver increasingly better results. That's why our agenda, I will cover strategy, first of all, then a bit about the market. I will talk about commodity prices and also about fertilizer prices; and Frederico will speak about innovation, he's our innovation head. Alvaro will talk about ESG; and Ivo will conclude our presentations with our economic and financial results. And I'll come back to speak about our future. On the strategic side, this screen summarizes the history and the evolution of SLC. Mr. Logemann mentioned when the company began, but the first 30 years of SLC Agrícola were years of focus on real estate investment in the new ag frontier. After that, phase number two in SLC Agrícola was post IPO, buying more land, modernizing our management. And phase number three, and that's the one we want to talk about a lot today. And there are 4 pillars that guide our activities in this third phase of the company. I will speak about the first 2, growth and efficiency of our operation and then our colleagues will speak about the other 2 pillars, financial solidity and protagonism in ESG. And our strong presence in ESG is not by chance. We have a history on that topic. Ever since I graduated and came to the company to create the ag planning department for us to develop a sustainable production system within our farms. Asset-light growth. Going into the first topic of our presentation, the asset-light growth. We have managed to deliver that growth and the graph speaks for itself, showing our evolution in the 2021, 2022 season, where we grew 46% in our planted area through 2 acquisitions I will discuss. So the graph shows the stable acreage in our own area and our growth through leases and partnerships. On the next graph, I'll go into efficiency. Why? Today, we have a mature portfolio, 99% of our land is mature. And that's why yields indicators show that we have reached the results above Brazilian averages, showing how competitive the company is. If you produce commodities, you have 2 possibilities, either you increase yields or you reduce production cost so that you rise above the pack and you increase your profitability and return to shareholders. Mature portfolio, focused on the second crop maximization in asset use. We have 50% of our -- of the land where we operate, we can have a second crop, but we are intensifying that as much as we can through soybeans and then cotton and corn, and we are now entering more strongly in crop and livestock farming as we call the third crop. First, we plant soybeans, then corn, brachiaria and after that, you have the cattle grazing return, a higher return per hectare, higher than what we had before when we just planted one crop a year. Now I'd like to show you the cases and the deliveries we had over the past few years. The major 2021 project was the acquisition of Terra Santa, with a mature portfolio in a very noble area in Brazil in the state of Mato Grosso, a project and a long-term 20-year contract, where we will operate that land, an appropriate capital structure. Fiscal credit present in that area. So it is a project that we adopted that fortunately is generating a lot of value to SLC Agrícola and fortunately, a lot of value to the shareholders from Terra center. It's still a real estate company, leasing land to SLC Agrícola. The second project we had in 2021 was the acquisition of Agrícola Xingu, a partnership we have with Mitsui. We have had a partnership with Mitsui since 2013. In 2 other farms, that partnership continues. However, those 2 farms that Mitsui operated by its own were leased to us 45,000 hectares of planted area, a 15-year-old contract in Bahia, a 10-year-old -- a 10-year contract in Goias with mature land and the data of the current crop shows that. We are concluding soybean harvest in 2022. And our challenge in the 2021-'22 season was to deliver that 45% growth while maintaining efficient operations. The soybean yield we are announcing today is proof of that. Our average is similar to last year's average throughout the company. Over 66 bags of soybean per hectare confirming our theory that this expansion into mature area will maintain the efficiency of our operation. But above all, efficiency in execution. It's not enough to have mature area. If you do not have execution efficiency, you can't deliver excellent results. And we are delivering in '21, '22 season, we are delivering as good results or even better than last year's results that you will see for the 2021 figures. The third success story is the seed production project. We produce soybean grains. We produce cotton seeds. And we have 2 choices. And it can be either consumed as grains or it can be used as seeds, and we are converting grains into seeds. And in the current season, we are delivering 761,000 hectares of soybeans -- or bags, not hectares of soybean seeds. 85,000 bags of cotton seeds. This is a project that we began 4 years ago and is evolving extraordinarily adding value and generating more results in the same asset, namely land. The feed project is totally asset-light because we have a seed processing unit in Goias and in Bahia, both of them are contracted out. And now I'd like to speak about the next project that will take place in Mato Grosso. I would just like to reinforce the important pillars of the seed production project, people, processes, technology and the support structure and the synergy we can generate. Seed production SLC Agrícola generates a lot of synergies to the grain production that we have. That's why it's a project that adds value. We measure how much seed production is adding value wise to our shareholders over the years. Although as a company, it's within the same company, it's just a different brand, SLC seeds or Sementes, but it does generate additional value, and that's totally connected with our asset-light growth. This is another project. Today, we can produce up to 1.3 million bags of seeds in the original project in Goias, Bahia and now in Minas Gerais, another seed processing unit we contracted out. Even in Tocantins, we produce seeds in between the crop seasons. We have a potential of 1.3 million bags of soybean seeds. We signed an agreement with one of our partners. It's not a partnership project, a partner that will invest in a seed processing unit, the most modern in Latin America, in the Paiaguás farm we have in Mato Grosso. Kothe Logística is an exemplary company in terms of logistics and storage. They will build refrigerated seed processing unit, and we will commission their services with a capacity of over 1 million soybean seed bags. It has become a large business within SLC Agrícola generating value and generating value to the company, to the shareholders. Cattle production is here to supplement our operations. We have cattle production in different systems. We have marginal areas. Every firm has more sandy soil. So we are planting pasture and managing cattle there. We also have areas where we plant soybeans, where we can't have a second crop using corn or cotton. So we plant brachiaria where the cattle we graze and also areas where we grow soybeans, corn, brachiaria in the middle of the corn. And then cattle grace on that land. So that's one more way to generate results in the same land we have maximizing our production system. Once again, that maximization of our production system is very important to generate results to the company and value to shareholders. But it's very important sustainability wise. We must produce more food, more fiber while using the same natural resources that are finite and scarce. That's why we must intensify our production system, generating more products by hectare. I always compare our production system in Brazil with the one in other countries. We are able to produce 6 to 7 tons per hectare as compared to the world that, on average, only produces 3.5 tons of grains per year. There are some cases, an internal benchmark, where we produce 5 tons of soybeans and another 10 tons of corn. So we are producing 15 tons per hectare of land because of the intensive use of natural resources. All right. That's a bit of our deliveries. In our asset-light growth in terms of the efficiency in our operations, I mentioned that we are concluding harvesting the soyabeans. We've already planted cotton with high-yield potential. Today, we plan to double crop cotton. During the right window last year, you must remember that we had to delay planting cotton. Just like corn last year, we planted corn late in March. This year, we planted corn in February. So cotton and corn have been planted and they show high yield potential. You remember that last year, we had drought in Mato Grosso do Sul and it didn't rain as much in Mato Grosso do Sul. This year, normal weather is expected. That's why in 2022, we grew 46%. Our soybean yield was similar to what we had last year. And our expectation is that for cotton we will have higher yields this year compared to last year. And in corn yields will be higher because we managed to plant corn at the right time. Last year, planting was delayed. Let me speak a little about the market now. I will talk about commodity prices, soybean, corn and cotton and also the price of our main input, fertilizers. And unfortunately, there are challenges ahead. But first, let me show you the weather pattern in Brazil, Argentina and Paraguay this last season. This map shows the rainfall in January in Brazil. I do not have the map for Argentina and Paraguay. But how much it rained in Southern Brazil was what it rained in Paraguay, in Northern Argentina. We had a significant rain deficit in Argentina, in Southern Brazil and excessive rain in Mato Grosso causing a few issues, but it didn't affect our yield significantly. That's why we delivered excellent results. In February, we had almost the same thing. It didn't rain in mid-South Brazil. It rained a little more in Mato Grosso, disturbing our harvest. We harvested 66 -- we could have harvested 68, 69 bags per hectare hadn't it been for excessive rain. But lower rainfall in Southern Brazil, Paraguay and Argentina led to crop failure in soyabeans in Latin America, affecting the world supply in over 30 million tons of soybeans that were not produced in Southern Brazil, Paraguay and Argentina. So what happened to prices? So you see here the map of the United States, the forecast is that May, June and July, which is their season there, that there's going to be low rainfall in some regions and too much rainfall in other regions. So you have to pay attention to that the soybean, corn and cotton supply in the world today is limited the -- all the stocks are low. So if there's any climate problem in the United States and Northern Hemisphere that will lead to any reduction of production as to what was estimated early on will be a factor for a price rally. So the traditional weather market this year is expected to be even more intense this year because global stocks are low. The soybean price. Just look at the soybean prices today, $17 per bushel. Very high prices because of low supply. So this why we have higher prices. If you look at estimations for next year, $14, it's not as high as prices today, but still high prices, $14 per bushel. Looking at soybean supply and demand, what draws your attention here, is the higher -- the demand is higher than supply. In the past 3 years, there were 2 years in which demand was much higher than supply. So that's why prices are high. So what is the market saying to Brazilian and global producers or growers? Well, plant more -- we need more soybean, our stocks are low. So this is the message that the market is telling us today. So this is why in Brazil, Brazilian growers are expanding their production area, trying to meet international demand. And corn and soybean are always hand-in-hand and corn prices are up and war in Ukraine has increased prices even further because Ukraine is an important corn supplier in the world. And with the war there, the logistics for corn exports, the corn that was already harvested, but will not be sent to other countries. And they should start planting in April. So we don't know if Ukrainians will be able to plant corn this year, and it's likely that they won't. So there is an expectation of lower supply and higher prices. So irrespective of the war in Ukraine, just look at this graph. This year with the drought in Southern Brazil, we don't produce so much corn in that season, that's why our production was not that affected. Our important corn production in Brazil is in second seasons, but we had 3 or 4 years actually in a row where supply was lower than demand. That's why there's such pressure on prices. And today, we see high soybean prices, high corn prices and the other commodities go together. They follow suit in the case of cotton. What is cotton -- why is cotton related to soybean and corn? Because there's competition for area in United States. So if there's high soybean and corn prices, Americans will plant more soybeans and corn and less cotton. The same in China. In China, they grow cotton because in the Xinjiang region, there are government subsidies. But in the Midwest of China, where there is no cotton subsidies, growers are planting rice, soybean and corn, and this will also put the pressure on cotton prices. And this is why for the second year in a row, if you look at the 5 years, there was the pandemic, where cotton demand was lower and then supply was higher than demand. And in the other 4 years, we see that the supply was lower than demand and then we see $1.20 per pound cut in the futures. Future prices are lower, but the expectation is that there's going to be a balance between soybean, cotton and corn prices. And because of that, cotton prices will be higher than historical prices. And this is going to be very profitable for Brazilian growers to grow cotton with a very high yield and quality. Fertilizers. Our fertilizers is the big challenge today. For season 2021-2022, we are harvesting now. So we already bought the input and the price was already paid for. And therefore, our production costs in 2021-'22 season is being managed. But prices are up now, and the expectation is that our margins in 2022 will be similar or better than those in 2021. But we see here fertilizer prices, and this is a graph that concerns us. If we look at 2022-'23 season, we got nearly half of the fertilizers we need. And we bought potassium, which is the product that Russia and Belorussia, mostly supply to the world, 40% of global exports come from those 2 countries. We have already bought 83% of our potassium. So today, we do not depend so much on Russia and Belorussia, and that's why our expectation is that we will have supplies for the next season. Now prices are high. Of course, 50% that we bought, we bought at lower prices, let's say. So what has not been acquired yet, we don't know what price will have to be paid. Prices are high today. Nitrogen, for instance, its price was going down. But then with the war, prices -- nitrogen prices are back to a very high level, potassium and phosphorus are at a very high level and because there's more and tension. So what will happen to prices depend on what happens in the world. We know that historically, fertilizer prices don't remain at a very high level for a long time. So expectation is that over time, prices will be adjusted. But irrespective of that, what is our vision for 2023? Higher fertilizer prices, higher costs but also higher commodity prices as well. So we expect to have good margins in 2023. So that's the first part of my presentation, and thank you for your attention. Now I'd like to turn it over to Frederico Logemann,, Innovation Head, and he's going to be telling us about innovation initiatives, which are fully aligned with our strategy to maximize operational efficiency.

Thank you, Pavinato. Good afternoon, everyone. It's a pleasure to be here to talk to the financial market now as Head for Innovation and Strategy as well. When we talk about innovation at SLC, I think the important point to frame this discussion is to say what we want with innovation at SLC? Our innovation mission is based on the connection between strategy as you saw in Pavinato's update and the model of 3 innovation horizons. Today, our innovation ambition is linked to horizon 1 which is using technologies to support the business as it is today. Last year, we expanded that scope and the linked into horizon 2 where our ambition is to renew the business with a long-term view. Over the past few years, at SLC Agrícola, we've established some teams and programs to speed up the company's digital transformation, speed up the adoption of new technologies and also adopt a culture for cooperation and agile culture. So in this slide, we see a summary of programs that were introduced in the past few years, and I'll go into more details of each one of them now. In 2021, we established the new department, the innovation department, and we see in the slide how it connects to the other teams and departments in the company. So indeed today, we have an internal ecosystem and also an external ecosystem, including a number of initiatives at different levels of maturity. So this is the model that we've designed, and we think it's been very successful so much so that we've been increasing the number of initiatives. So I'll give us some updates on some concrete deliveries we had. And as we talk about innovation and digital, the first step, of course, is connectivity. We've been giving the market updates regarding that. Today, there are 16 farms with a completely connected fields with 4G most of them and one of them with 5G coverage, and business has been growing a lot. So we are trying to connect every new farm that's been acquired. So we will be able then to enjoy all of the benefits of digital agriculture. These are also figures that we've been sharing with the market. We see here the benefit we've been trying to get from new technologies. So here, you see basically 3 groups of new technologies. And in the last season, we had BRL 25 million savings because of them. And the goal this year is that this is -- this benefit is going to be double, the net benefit of BRL 50 million. These technologies, well, 5 or 4 years ago, we are learning how to use them and to master them. Today, we are scaling their use up in the company. The digital lab is our software factory. I won't be able to go into the details of each one of the deliveries here, but it's an organization that develops software for our use. And some of these initiatives were based on the innovation programs that we have and some of them are older than that and then they've been updated every year. And this is the innovation organization that we established last year that works based on 4 pillars. There's an entrepreneurship program called ideas and results, and there is a start-up connection program called Agro Exponential and then there's SLC Ventures established last year, which is our investment vehicle with a mid- and long-term vision. So we've been increasing the number of innovation initiatives, and we started to work with an idea of an innovation portfolio. We jokingly say that this is the nursery of the innovation initiatives in the company. Every technology we use today started as an idea, then prototype, and then they were scaled up. And today, we enjoy the benefits. Today, there are 44 initiatives that are beginning and that are managed by the innovation group last year. We performed 39 proofs of concepts, trying to validate hypothesis, and we did roll out of those solutions in the company. So these are some examples of the last year's rollout. So initiatives in different areas was into sustainability, sales, mechanization. So teams met last year and worked together to understand the new technology and then prototype ideas. And then eventually, the technology was rolled out last year. And finally, SLC Ventures was the latest organization that we established. We started to analyze different investment alternatives last year and also working as a venture builder, we have 2 projects underway. They are at the initial stages, but we will update the market as they become more important. So we are here sowing some seeds, some business seeds that can be important in the future. Also, we're trying to promote synergies between the different initiatives. The venture -- one of the venture builder projects was born in the ideas and results program. So we are now giving it seed capital to turn it into a business. Also, we are assessing investments in some of the companies that came from the Agro Exponential program. So it's important to look at the picture as a whole because then things make more sense because we can find synergies between the different projects and initiatives. So I spoke about the different initiatives and groups in the company. And last year also, we came up with the idea of designing a new brand, and it's an honor for me to introduce this new brand to you. It's horizonte SLC, representing the intent driver of the company. So this is the innovation brand of SLC Agrícola. We will now watch a video, and it will explain what horizonte SLC is. So let's watch the video. [Presentation]

So this video shows you what we want with this new brand. And I'd like to take this opportunity to thank everyone in the company and out the company that are helping us created the agriculture of the future, and we wanted to speed this process up with this new brand. Thank you. I'll turn it over to Alvaro, who's going to be telling you more about our ESG programs.

Thank you, and good afternoon, everyone. Thank you all for having joined us in this meeting. I'm very happy to be here to talk to you about sustainability. Sustainability is in the DNA of SLC Agrícola. We've always been very careful with our properties, with the production environment. And sustainability is being important for us for many years. And when we went public, we've defined some parameters and a journey for 2008, 2009, and the company then had the following thinking. The future of agriculture is certified agriculture, it's traceable agriculture. So back then, this vision guided us into the future being protagonists of the future and the sustainability today has a specific agenda, the ESG agenda. But at that time, we would jokingly say that sustainability was not something [ exoteric ]. You needed to be able to measure it and develop it. And sustainability was included in the company's strategy. We wanted to be able to use sustainability and create value for the company's investors and shareholders. And the evolution of that is ESG. But before that, we became signatories to the UN's Global Compact in Brazil with -- and also the business principles in 2015. After that, the COP-15 in Paris gave us guidance for the improvement of our standards. So sustainability has evolved since then. And today, the company is more robust and diligent, so to speak. So we know that the ESG agenda is very important for investors because it includes risk management, opportunity management. So I'd like to point out that in 2016, the company started to work with the sustainable development goals, trying to understand how the UN 2030's agenda would make sense for a company in agri business, such as our case. In 2018, we had a meeting with our leaders in a 2-day workshop because we will look at the very ample sustainability scope. So we defined 3 paths that would be like the big themes, the big concerns important for the world, for Brazil and for us. So climate and soil changes is one of them, water and biodiversity as well and stakeholder relationship. So this is all connected to the sustainable development goals. There are 17 goals, but I guess, we have initiatives and programs for all of the 17 goals, but our priorities are objective number eight, for decent work; 12, responsible production; 13, climate change and the scenarios of change and adaptation that the company needs to take into account for the future. And water which is so important. And of course, the environment in general. So these are the 3 paths in which we've made progress. And the first materiality that we came up with was 2016 with a survey with many stakeholders and players. Based on that, we came up with 10 material themes and then in 2021, we updated these metrics. We once again talked to people have more than 500 people who answered our surface because we wanted to see if a change was required than it was. So we have now these 3 areas of ESG in terms of environmental, we talk about climate change and environmental management systems. So this is what has been demanded from SLC Agrícola in the social field, working on social and economic impact, people development. So training people, training our employees and also in education. Diversity and inclusion is an important point. That is important in every company today, and we are not an exception. And finally, quality of life, health and safety. And then governance. As I mentioned, today's certification, both for properties and for the most important products and also traceability. And then second point, FX and the code of conduct and a very good compliance group in the company today with awareness and training more than 2,800 people were trained in compliance, innovation. Well, Frederico already spoke about that. So everything leading to high performance, even ESG. Even if there's this idea of risk management, we try to use that and improve our performance based on innovation that is intimately connected to sustainability and risk management, which is the concern of investors because it's to do with the image and reputation of companies. How is our ESG governance? We established an ESG Committee late in 2020 with 3 of our Board members. Pavinato, the Chairman is part of the Committee, and I am a member as well. So we look at the strategy for ESG. And at the same time, there is the sustainability organization in the company, in which you find environment management, quality management, health and safety management, process management and project management. Based on 4 international standards, ISO 14000 for environmental management, ISO 45001 that replaced 18,000 for health and safety and BR-16001. These 3 standards were the business of our management system. And later on, also, we included ISO 9001 for quality management and the company's strategy. Today, 11 of our units are certified according to the system. It's a very dynamic system. Every year, we improve. And we go beyond just complying with the legislation, which is already something very complex in Brazil. To give you an idea, we have to comply with more than thousands of laws, regulations and standards in each one of our properties. And we have a robust software program that manages operating licenses and their requirements and they expire every 2 or 3 or 4 years. And then we do annual analysis, and all of that is third-party certified in the company. So we look at risks and impacts in every unit. Our mission and ambition is that all of 22 sites will be part of this very complex system by 2026, and that's what we are working for right now. Let's look at some of the outcomes of all of that. In cotton, soybean, we certified sites and products, ABR and a better cotton initiative, which looks at the whole supply chain. And supply of an ABR is Brazilian certification for Brazilian farms. So 100% of our cotton and lint is certified. So as I mentioned, 13 years ago, we knew that the future would be of certified agriculture. And we wanted to open our markets. We've have companies that buy directly from us because we have the BCI or the ABR certification. So it's important that we've been at the forefront. And -- in 2009, we were part of the -- I was part of the Board, and we came up with the principles and criteria for platform, the RTRS certification is implemented in 123,000 hectares for 2021 season with many thousands of tons of certified soybeans. It means that we can make sure that all of soybeans in those 123,000 hectares in those farms that are certified according to demand for credits. It means that there's 0 deforestation since 2009 in those RTRS certified. So since 2009, we've had in our silos, which are free from deforestation. And that generates financial credits. It's a little bit of value. But in 2021, in addition to soybean, et cetera, we also had BRL 4,500,000 coming from [Technical Difficulty] [Foreign Language]

So 12.1% on the annualized basis. The CDI during this period 7.71%. So we are delivering above CDI with a very interesting return. The appreciation of our assets, a very important item, I wouldn't say it lost value but didn't lose value to company. It's a star when we talk about that negotiation for a number of collaterals. in 2017, it was work BRL 713 million, BRL 713 million same portfolio is BRL 4 billion, BRL 3.9 billion. And the total company portfolio because we bought other assets during that period is BRL 6.9 million. So we are generating cash and we also have the appreciation of our assets and that do not appear in our balance so clearly. So we have a CAGR of 13.5%, which is an interesting number. This is the debt profile. 25% short term and 75% long term, which gives us some comfort to renegotiate that and raise more money over the period. Well, it was easy to speak about the figures because they speak for themselves. I turn it over to Pavinato, who will speak about the future that motivates us so much. Pavinato, over to you.

Very nice. Ivo, thank you so much. Thank you, very financial information. Let us go into our final round and then we're going to have a Q&A. I just wanted to talk about the future that lies ahead. As I mentioned earlier on, our future is promising. I usually tell our team, we have 3 pillars that guide our activities: people, processes and technologies. We are investing a lot and on the pillar, people, that's the most important one. And the people pillar with positive indicators, low turnover, high engagement level, low accident rates, very high satisfaction level, all of those are people indicators that show hours of training a year. These are indicators showing how mature the team is and how prepared we are for the future, and the preparation of the team guarantees the future. That's like -- that's why I like to reinforce how prepared we are to keep on growing, to keep on evolving in our efficiency. And as a result, we will deliver increasingly better results for our shareholders. Let us now speak about the midterm -- short to midterm. 2022 is in the bag. The crop is almost guaranteed. On average, for the 3 crops, 70% of our crops have been sold forward with a fixed interest rate. So we only have 30% to be sold, that 30% yet to be sold will benefit from higher prices. The cost has already been covered. So 2022 promises to be as good as 2021 as far as margins are concerned. As we grew 45% in our acreage, prices went up another 20% to 30%. Look at the growth potential that we have for revenue, EBITDA and net profit for 2022. So 2022, once again is a year where SLC will achieve record results. Now 2023, will be a year where there will be a scenario of increased costs, as I mentioned before. But take a look at this table. The prices, we have already sold forward part of our production also for very good prices and the balance to be sold for commodities is higher than the prices we will pay for the inputs. So we expect all cost increase is expected for the '22, '23 season will be offset by price increases we enjoy in our ag commodities. So 2022-2023 will give us very high margins. That's the scenario we are designing today. There's a discussion on input supplies. We can discuss that some more during our Q&A session. But we believe that we will be able to manage the input supply factors ensuring appropriate execution of the 2022-2023 season, still delivering excellent results to our shareholders. Based on the economic scenario, I alluded to, based on how prepared our team is, we will continue working on our strategy. Our strategy is based on the 4 pillars I mentioned: asset-light growth; looking for greater efficiency in our operations; consistent financial indicators and capital allocation for projects that generate more return; and increasingly reinforcing our protagonism in ESG. This slide, you see sort of summarizes what I said. And we are highly optimistic about the future. Because when we look at the demand side in the mid to long term, it's quite consistent. All indicators are favorable. The population will keep on growing. World GDP will keep on growing. The demand for biofuels will keep on growing, and the population will increasingly migrate from rural to urban areas. Four drivers that will determine demand growth. If there is demand, somebody will need to produce to meet that demand. Fortunately, Brazil is the best prepared country to meet that demand growth. And within Brazil, SLC is a company prepared to keep on growing and to meet that world demand. That's why we are optimistic about the future. Our team is prepared. Our investment capacity is appropriate and demand is there. And we will work to evolve our operations, both in terms of growth in planted area, the diversification of businesses also maximizing efficiency in our operations. Very well, we'd like to reinforce our big dream at SLC because this message says a lot. How can you impact future generations by being an example to that future generation? How do you want to become a reference in efficiency being one of the best operators in the market respecting the planet totally connected with ESG sustainability? So we work to deliver the big dream SLC has for our stakeholders at every level. And we also work based on values. That's why we reinforced the 4 values of the company that very objectively summarize how as employees we must behave. And if we do that, the company will be recognized for those values. Thank you very much for your attention. I would like to thank our team for the preparation and for the presentations. And we now open for questions from our investors, analysts and clarify whatever question you may have. Thank you so much. I invite my colleagues to join me on the stage so that we can answer questions that come in.

Thank you very much, Eduardo, Pavinato, Alvaro, Ivo and Frederico for presenting all these relevant information about our company. Well, it is now time to begin the second part of our meeting. I'm going to ask Pavinato to remain here, Ivo is already here. We're going to open up for questions. There will be questions answered by WhatsApp and others that were sent through the screen here.

We have a first question from Thiago Duarte from BTG Pactual.

Congratulations on this event. Two questions on my side. The first about the topic described by Pavinato, 2 opportunities in the input market, especially fertilizers. You [indiscernible] something you had been saying since the import market showed a relevant inflation last year. You said that historically -- due to the high prices of fertilizers that destroy demand. On the other hand, part of the discussion, the market is having, it's not just a price and demand discussion but also a discussion of availability of some of those inputs. I'd like to hear from you on those 2 points, if you understand that demand is retracting in Brazil and abroad because of prices if demand is being reduced. And if besides price, do you envisage any product shortage in certain regions or in certain periods of time along with the next crop season and the one after that? And do you see any impact this may have on yield perhaps not for SLC but on some smaller farmers in Brazil and abroad? I think that's a very important point. So that's my first question. The second one has to do with growth. This last year even 2022, and the important component you call asset 3 -- asset-light investments focused on mature areas. You mentioned technology as a game changer. I'd like to hear you on what we can imagine about new growth drivers for the company, both in terms of replicating transactions like you had with Terra Santa and Xingu. How much bigger can that asset-light model become after those 2 transactions? And also SLC seeds because that's a project proving to be very interesting with a very high potential, as Pavinato mentioned, it's already a big business within SLC, and how that can evolve not only within SLC, but possibly even considering a spinoff? So what do you think about that new growth trend?

Okay. Thiago, thank you very much for your 2 questions. On the fertilizers, up until the war with Ukraine, we had 2 variables, demand and price that was affecting demand. Now we have a third variable, supply, namely. So let us begin with the supply variable. The big discussion is, to what extent will Russia and Byelorussia will be able to send fertilizers to the countries since they are net exporters, Belarus rather? Let us take nitrogen, 176 tons of urea the world produce Russia and Belarus produce 6% of that volume only, only 6%. If you talk about nitrate where the world produces 20 million tons, they produce 50%. Ammonium sulfate out of the 20 million the world produces, they produce only 1.6% in a nutshell. And nitrogen, Russia and Belarus produce about 10% of what the world produces. So that supply difficulty from Russia and Belarus will generate a lack of supply, no, because they only account for 10% of the world supply "only." If we take the second component, P, phosphorus, out of the 87 million tons the world produces, Russia and Belarus also produce around 6% of that. So it's also a nutrient where there shouldn't be a lack of supply because of logistics problems caused by the war. The third one, k, potassium, we might have a problem out of the 66 million tons produced by the world, Russia and Belarus produce 36% and they account for 40% of exports. So not having potassium from Russia and Belarus means that, indeed there's going to be a global shortage. Fortunately, SLC has acquired potassium for the next season, and we believe that 1 year from now which is before the next season, the war will be behind us and this problem will have been solved. So there is a problem today of global shortage, especially when you look at potassium. When you look at demand then prices at the high levels that they are today historically is something that really affects demand. So how much they will affect demand? Well, it should be commensurate with the reduction in supply. In 2018, '19 there was a 17% decrease in demand for fertilizers in the U.S. and in Brazil as well. So this year, because commodity prices are higher, it is likely that demand will not be so much affected. But it will be something in the range of 10% to 20% of nitrogen, there'll be a rearrangement in the international market, and it is likely that there'll be a balance in supply because demand will be lower. In the case of potassium, yes, the world depends on potassium from Russia and Belarus. So we expect the war not to be too long, and then they will be able to export potassium. Even if Russia wants to start to continue exporting, it's not being able to because of a number of challenges, but we expect that there won't be any effects on the 2022-2023 season. Well, prices were at a very high level, but they were on a downward trend and then everyone expected prices to go down over the year. And by the end of the year, prices would be lower, but the wars changed everything. So prices are up once again, $1,000 per ton of each one of the nutrients. And is it going to be at $1,000 or go up to $1,200? It all depends on the war. If the war ends, the prices might go down and the prices may increase if the war doesn't end. So is it going to affect yields? Well, our strategy is to reduce the use of fertilizers by 20% to 25% without affecting yield because in the past few years, we've been evolving our crops. But in Brazil as well, you see that there's been an expansion in 5%, 7% of area and has increased the use of fertilizers by 2025 plan. So we've grown our stock. So in the first year, I don't think that's going to be significant drop in yield because of the shortage of fertilizers. In temperate countries, the soil is usually very fertile. And if you don't use potassium and phosphorus for 1 year is not a problem. That's not the case of nitrogen, which is not for soybean, but for corn and cotton. So we depend on nitrogen every year. So this is the main challenge, I think, this year. We need adequate supply of nitrogen. Of course, in the United States, they might be growing -- planting less corn and a bit more soybean because of the high fertilizer price. And the nitrogen fertilizer industry is large and diversified. So any adjustments in the cost of natural gas, the industry can respond very quickly and increase its supply because the natural gas price today is what's driving the cost of nitrogen up and prices are up and costs are up as well. So nitrogen is maybe the nutrient that is the most challenging one for us because of its production cost and potassium in terms of its supply capacity. So this is the challenge we needed to manage in this next season in Brazil. And you also asked about the company's growth. Now consolidation is a possibility. Our business model is replicable. We have today 22 farms. We could have 25, 26 or 30 farms. So yes, we could grow. Of course, this will happen depending on the opportunities we see in the marketplace. Diversification, as you mentioned. So indeed, our seed project is diversification. We are investing -- we'll go on investing in that. Also, the corn livestock farming project is another project that can be expanded and we can create more value there and the diversification of other businesses and crops is always possible. Today, we are a food production company and we have to be attentive to the opportunities in the food industry globally. So discussion of fruits could be an opportunity. But these are strategic projects that will be considered as opportunities come up. So if you have financial capacity to grow, you can make the most out of the opportunities. And that's been the case. We have the natural capacity. And this is not a linear project. You don't grow the same every year. You might grow more this year and the next year don't grow as much. The most important thing is to look at the movie and not at the trailer. So this is the idea. We want to go on growing in the near future.

Now Victor Saragiotto from Credit Suisse wants to ask the next question.

And congratulations for this meeting. And congratulations for your performance. I have two questions as well. The first is also about growth. We see other companies in related agribusiness sectors and they start to diversify their business going beyond just crop. So I'd like to know from you if this is something that you consider. So diversifying our business may be into complementary businesses such as, for instance, transportation and storage, where there are some opportunities in the market? And my second question is when we look at value creation with acquisition and transformation of land being very important. We see that SLC has been reducing the percentage of its own areas regarding -- when you look at the total planted area. So given cash generation and opportunities we see in some regions in Brazil, when we look at land prices, don't you think you could speed up the acquisition of land for transformation and also real estate profit?

Well, thank you, Victor, for your questions. When it comes to new projects, we focus more today on innovation than on traditional businesses. So growing in the traditional businesses that require heavy investments is not part of our primary scope. Today, as we saw in Frederico's presentation, we want with SLC Ventures, for instance, to find solutions and work on our strategy of being the businesses of the future. And the businesses of the future might not be the same as the businesses of the past in the agribusiness industry. So this is our mindset today. We focus on innovation and wanted to capture value within the agribusiness industry, but investing in innovative projects and businesses. And we might have changes in our business model in the future when we compare to our business model today. Now your second question about investments in land. We've invested heavily in land few years. We bought a lot of land when it was cheap, then we stopped and then we just sold 2 or 3 properties just to show how valuable those -- they were. Today, we have 2/3 of our own land [indiscernible] leased. And in the past few years, we have been leasing a lot and it's diluted our land portfolio. So we think that land price appreciation will create value for the company in the future. So just as you mentioned, if there are opportunities, we consider the opportunity of buying land opportunistically actually and adding that to our portfolio and then also create value through land purchase. So conversion of pasture yes, but no conversion of native forest. We told the market that we will no longer work in areas where you find today native for us. We are going to be working in material areas or pasture areas that can be converted to crop. So our idea is that having our share of owned land is convenient and brings more stability to our business. So in the future, in addition to growing by lease, we also consider growing by acquiring land.

The next question is going to be asked by Guilherme Palhares of Bank of America.

I have two quick questions. We've been discussing the fertilizer landscape. I have two questions to follow up on Thiago's. The first is if you could give us more details regarding ag chemical. Because you've been telling us about fertilizers, but how do you see process and availability of ag chemicals? And when you look at inputs in general, how are you planning the crops for the next season? And how do they affect your plan in terms of how much you're going to be growing of each of the crops?

Our ag chemicals, well, its supply is also challenging because of the pandemic and not of the war now. And all of the problems in supply chain, and there's still problems of the industry supply and the demand of ag chemicals. So we've acquired 60% of the ag chemicals we need. So we believe we will ensure the supply of our operations for the next season. And they are expensive of course, prices are higher than they were before. And so the next season, it's going to be more expensive than this year. So there's going to be an increase in ag chemical costs in addition to fertilizer costs. But the ag chemical industry is working hard to be able to increase supply this year. It's been very challenging for the industries. Well, we've been able to plant and harvest. So it was hard, but we managed to get what we needed in time for the operation. So the supply challenges didn't have much of negative effect. And I think next year is going to be similar. There's going to be challenges and shortages, but the ag chemical industry is going to be able to deliver input in time for planning. Now changes in crops. As I mentioned before, crops that require more ag chemicals and more fertilizers, what I think is that there won't be any increases cotton or corn. Soybean is the crop that least demand in fertilizers, just phosphorus and potassium, you don't need to use nitrogen. And also soybeans don't require so much ag chemicals in terms of insecticides, fungicides. Soybean would be the favorite crop this year, if you consider input shortage. So that's why we think that United States growers will be planting more soybeans and in Argentina as well. Brazil cotton, it's a second season for us. So we're going to be planting as much soybeans as we can. Maybe we won't be expanding cotton areas because of the shortage and input. In our case, our strategy is to maintain our portfolio. Same cotton volume and the same soybean volume. So this is our strategy. Was there another question? No, right?

Now [ Hannah Mora ] from Itau is going to ask a question.

Congratulations on this meeting and on your performance. I have two questions as well. The first is about your Q4 results. We saw the use of working capital, especially in Q4, which is different from what we had seen before. So I'd like to ask a question about the working capital seasonability going forward and what was last year different? So this is the first question. The second question is about Russia and Ukraine and fertilizer availability. What do you think regarding the use of biologic fertilizers? Would you -- would that help you protect against the shortage of fertilizers? Or do you think that there's no sufficient supply of biologics? These are my 2 questions.

Thank you, Hannah. So let me answer your question about working capital. Q4 historically is when we mostly generate cash. And last year was an exception. And there's a reason for that. We ended the year with BRL 130 million in cash, which is usually -- we closed the year with BRL 900 million, BRL 1 billion because that's when we're selling our cotton harvest, which is the one that creates more value. And why is it that we had lower cash? Because we paid our January and February suppliers early. We have a covenant that ends in 2024, '25 that the relation between total assets and net equity cannot be higher than 2.5x. So without the price volatility of the commodities and our NDFs were telling us that we were having losses. Of course, we sold cotton at $0.80, and the market was paying $1.20. So at $0.80, we were profitable, but there was a $0.40 loss in that transaction. The same would go to LDFs, which we sell at USD 5 and the dollar was at $5.50. And so we have this liability in derivatives. And the counterpart is the net equity and we have hedge accounting. So our indicators of total liabilities over net equity was around $2.45 and $2.50. And we wanted to take this chance of waiting the results to be audited to be sure whether or not we would have problems with the indicators. So we did two things. First, we got in touch with the banks, and we got a waiver from -- for all of the transactions that were open in our balance on December 31. But also, we wanted to comply with the covenant, we had BRL 1 billion cash. So in December, we prepaid BRL 128 million to suppliers. So the payments that would come due in January, February. So that's why we had the performance in working cap and leases as well. So yes. The long term -- yes, for the long term, yes, yes. There's, of course, yes, an increase in liability. Yes. There was a significant growth in liability because the Terra Santa transaction means increase in leases, a 20-year leases, but it's a BRL 2 million in liability. So still it was working fine. When we did the Terra Santa transaction, that was in the radar screen. But then what was not on our radar screen with the derivatives. So we decided not to take a chance. We did the prepayments and unfortunately, we had a $2.45 indicator and now January and February because we paid all of the suppliers, we're going to recompose the cash. And the second question about biologic fertilizers. Well, those biologic chemicals that uses that help us, for instance, with caterpillars, stinks where we are reducing the use of chemicals. Biological fertilizers are organic fertilizers. And what's an organic fertilizer? It's an organic matter from your fields and you use that in your meat production, and that comes back as a residue or else organic residue that you recycled and turned into organic fertilizer. So my answer to you is the biologic fertilizers is a complex topic. And it's difficult to supply all of the farmers and it would be difficult to have enough supply of organic fertilizers. Let's look at potassium, for instance, to illustrate. Each soybean bean ton that I sell to China includes with it 20 to 22 kilograms of K2O, potassium, that comes out of the ground. And I have to replace that potassium. So using organic fertilizers is not enough because they have 5% potassium content. And then if I use 1,000 kilograms of organic fertilizer per hectare, it's going to be 50 kilograms of potassium. And then I plant soybeans, and produce 4 tons per hectare, it means that I will be exporting 85 kilograms of potassium per hectare to whoever buys my soybeans. So organic fertilizers work for organic agriculture, and that's a market niche. It doesn't work for the ag business in terms of its scale and it's -- because of its demand. I need to replace soil nutrients using concentrated products, and those are the chemical fertilizers. I'm unable to replenish my soil using organic fertilizer unless I had such a perfect chain that I would be able to replace 100% of what I -- about 100% of manure from pigs and from cattle and from poultry and human beings as well. And human beings as well, everything would have to go back into the fields, so as -- so that I would be able to create a balanced system.

Next question is going to be asked by Gabriel Barra from Citibank.

Well, thank you for the presentation. I might be a bit repetitive, but I'll be asking about something which I think is very important. This next season, correct me if I'm wrong, but 2021, when you look at costs, it's a given, right? We have a big upside because of our hedging operations up until 2 or 3 months ago, the scenario was completely different for ag commodities. But when you look at '22, '23, I don't know about this balance between commodity prices and production costs. So I know that your strategy is focused on return on cost, your CapEx. But in a high volatility of commodity price scenarios, are you going to change your strategy? If you look at the hedging transactions compared year-by-year, there's been no big differences if you look 1 year ahead. So how do you see this scenario of uncertainties? This is the first question. The second question, when you talk about fertilizers, I think an important point is that for better or worse, soil is a nutrient bank, and you showed a graph showing SLC soil maturity and comparing that to the new areas being Mato Grosso. And so in theory, your soil is better than competitors. You said that 20%, 25% decrease in use of fertilizers wouldn't affect your yields. And how do you see your competitors? I've heard 5% or 10%. Do you agree with that? And do you see that as a hedge when you look at the next crop and when you look at your competitors? These are my two questions.

Well, thank you, Gabriel. Your question about fertilizer use. Yes, you're right. Our soils are mature. We grow cotton, very fertile, so we can use less fertilizers. We can grow soybeans and without any decrease in yield. So this was a 20% to 25% reduction. The industry is going to reduce 10% to 20%. The average of the industry -- well, yesterday, we were discussing this. So maybe the reduction is going to be greater because of shortage in supply. So growers will have to use less fertilizers than they would like to because of the shortage. Now well, this is a challenge when you think about expanding planted areas because when you go into new land, usually, it's a low fertility soil. So if -- in times of shortage, it might be convenient to plant into new areas. So that limits supply. And because of that, prices tend to be maintained on a high level. I don't know if I understand your question about hedging. Today, we are more hedged for 2023 in terms of input than in commodity prices. So that's positive today because commodity prices are high at the spot market and the future prices are lower. Recently, the future prices have gone up. So if we sell today, we are selling at better prices than 1 month ago. And if we wait a bit longer, it is possible that we will be selling cotton at better prices than 1 months ago. We've sold at $0.84, $0.85 1 month ago. Maybe today, we might get $0.87 and soon $0.90. So having the input hedging ahead of commodity hedges. So it's been -- it's good in a year like this. We look at both together because commodity revenue is BRL 100, and our cost is not BRL 100, it's BRL 60 or BRL 70. So percentage-wise, input hedging is ahead of commodity prices. In absolute values, that's not the case, both go hand in hand. So in fixed prices for input and commodities. So we are hedged for input and commodity for '22, '23. And we have a commodity volume available to be sold at better prices than -- because we think there will be better prices for commodities because of shortage in commodity supply and the future price as well. $14 is the future price for same next year, spot price is $17. So this next year, the price is going to be $14 or $15? Maybe it's $15 next year. And the same goes to cotton and the spot price is on $1.20. And the future price for December 2023 is $0.83 today. So 1 year from now, the spot price, what is it going to be $1.00, $0.95? Great, much better than the current prices, if you think about the future. So this is why our scenario for 2023, there's many uncertainties yet. A lot will happen before that, but we think we'll be able to offer the increase in costs with increasing prices and still have good margins. This is our estimate. Of course, things might change over the way. But this is what we think will happen. 3 months ago, we were more pessimistic. We thought that input prices were high and the prices were on a downward trend, [indiscernible], that's completely changed today because of the drought in Southern Brazil, Argentina and Paraguay, that's completely changed the supply of grains and led to a change in prices. And then there's the war, the war is a short-term element. Oddly, if the war stops, that upside might come back. The upside of the war is from $15 to $17. The $14 to $15 is the drought. From $15 to $17 of which was because of the war. The same thing for [indiscernible], $5.50, $6 was drought from $6 to $7 was the war. So that upside for the war might stop as soon as the war stops. So in the midterm, we believe that the 2023 prices should be higher than they are today. The prices for 2023 today are not so high as these spot prices.

If you could remind us, at the same time of the year, last season, how much nitrogen fertilizer hedge you bought the same level or more?

We haven't bought anything last year. This year, we bought more than normally. We usually start negotiating in March. We've already bought 60%. But usually, we start negotiating in March and conclude in April, May or June, just like fertilizers. Nitrogen, we normally buy in May, June and July. And our expectation this year was to buy at the same period. Hadn't it been the war, prices would come down even more. It had dropped from BRL 800 to BRL 500, but the war came and changed the scenario in nitrogen. Well, we start receiving potassium now, and we apply it in between seasons. The same thing for phosphorus, we apply it in June, July, August, September between the 2 crops. Nitrogen is applied post planting. We apply it after we plant cotton. In the case of corn, we plant corn in February, and we apply nitrogen in February or March. So we start using nitrogen in November, and we use it until April last year next year. We may buy part of the fertilizer to apply in November, December, and we could buy part of it at the end of the year to use in February, March, or April. We could possibly wait to see how the war evolves, how prices and supply evolve.

Next question comes from Mary Cleia da Silva from Bank of Brazil.

Congratulations on your results. I'd like to go back to crop livestock farming. With the significant results you had from our capital, what is the potential growth of that segment? And this strategy, not only for this year, but also for the future ones, considering the improvement in the cattle cycle and how important can that be in the company? Second, about logistics. How do you see the potential impact on volumes because of lower availability of vessels and containers? We had shortage and high prices before the war. How much worse did the war make it?

For cattle, we are learning work with cattle. We created a team, veterinarians, professionals working on animal husbandry. We are increasing the number of head per year. Last year, it was 28,000 head. This year, we get to 34,000 head. We have a potential to get to 100,000 head. What is 100,000 head? The price today is BRL 5,000 of revenue per head. So the cattle business can get to BRL 500 million, BRL 600 million of revenue over the next few years. And that might be the potential in terms of business size for cattle. On logistics, war impacted -- almost impacted the most was the shipping of cotton due to the lack of containers and the price of containers. Logistics is normalizing. In January and February, we exported a lot of cotton. So we believe that over 2022, logistics will normalize, and we won't have problems exporting our cotton. We are exporting the balance of last year's crop. We will conclude until June. And we will export the volume we planted in the second half of this year.

Very well, Pavinato. We received two questions via WhatsApp, both to Ivo. First from Juan Carlos. Could you talk about your indebtedness? If there is cash, where will you invest?

Thank you for your question. Well, traditionally, 50% of the company's results are paid as dividends. And whenever we see that our shares are low, we open a buyback program. We have a buyback program of BRL 2 million that will be concluded soon. The remainder over the year there will be increase in our need for working capital because we have to pay suppliers. And we will harvest in the middle of the year. So the second half of the year generates a lot of cash. Our leveraging today is 1.7x. It will be closer to 1 than to 1.5. Because of cash generation, all the money coming from the planted area and the corn will yield more than last year. So cash generation will be very strong, and there will be a new challenge. With our EBITDA, the pressure from the Board is that it need to grow. Whenever the debt-to-EBITDA ratio goes above 2, we should stop growing. But when it's close to 1, there is pressure for us to resume growth.

One more question from WhatsApp from [indiscernible]. Do you expect to pay additional dividends?

If the Board doesn't find new projects or if the management doesn't find new projects, we might pay additional dividends because the Board won't allow us to be sub-leveraged. Below 1 would be sub-leveraging. If we don't have new projects that is profitable for the company, generating value possibly, we might have additional dividend payouts.

Thank you, Ivo. Next coming from Wagner from Quantitas.

Congratulations for your presentations and results. I have two questions. First, since you had 2/3 of leased land and you increased the volume of lease land because of return, can we expect more investment in owned land that 1/3, 2/3 ratio will continue? Or can we expect you to buy more land? And in which geographies will you grow? Will you grow in existing areas or in new geographies? Another question, Pavinato, fruit, I imagine that project had a given size, the company grew a lot in the past 2 years. The size of that project, I imagine is smaller than you originally thought. Have you mapped assets if you enter the fruit market, do you think it will be important for the company?

Thank you for the questions. Our expansion will take place in select geographies. Today, we are present in 7 states in the Brazilian Cerrado. So we are basically in every state in the Cerrado where we have annual crops. So expansion will take place in those regions. In every place where we are, we are talking about good regions and we have timely diversification for our business. The climate in the Cerrado is very stable, one of the best in the world. But even being in Mato Grosso, Mato Grosso do Sul, Bahia, Maranhão, Piauí and Minas Gerais. That diversity gives us fantastic stability in a year such as this. It grew a lot during harvest in Mato Grosso. It was wonderful in Mato Grosso do Sul, we had a record crop. We are harvesting a record drop in Bahia. The diversification we have today is fantastic, and it's likely to continue. So we will expand in the same geographies. As for fruit or fruits rather, the company has now a different size. And any new project should be big enough to change the needle in our compass. So we have to think about larger projects. There is no rush. We have a long-term vision. Not always does the project happen in the year you expected. So our management is working to make it feasible at a reasonable size that would warrant the project. There is no point creating a small project because it generates distraction rather than generating important results. So you will maintain the 1/3, 2/3 ratio of owned and leased land. I'd say it's appropriate. We will buy some pieces of land to maintain that ratio. But if it goes up a little, the volume of leased land as compared to owned land, it's okay. It's important to have leased land with high-yield potential in competitive regions where we can pay the lease and generate excellent results to our shareholders. Don't accept the idea of leasing land in marginal areas, not so productive areas. because in the moment of crisis, that's the area that suffers the most. If you have to pay the lease, cash generation will be used to pay the lease and there are no resources left for the operator. If we can grow leasing a lot, we will do it even if that changes that 1/3 to 2/3 ratio, but buying land to maintain that ratio is also convenient.

Thank you, Pavinato. One more question via WhatsApp from [ Rodrico ]. Thinking about synergies about your internal research and development and the investments in venture capital. Do you intend to sell solutions that are developed, tested and validated internally through Agro or other companies you invest in? Can this be a new growth factor for the company in the long term?

Certainly. SLC Ventures and SLC Builder has that bias to keep an eye on investment opportunities and development opportunities and why not when they turn that into a business. Will that happen? I don't know. We see that we must invest in this area. Will we create a viable product? I don't know. Every business will undergo important changes over the years, important changes in terms of management, you know that. There is management outside the farm gates and complex management within the farm gates. Outside the farm gates, the market is more organized and more concentrated. So we intend to work strongly with that vision of innovation to see what can be done differently management-wise thinking in the long term and thinking about where or how the world will evolve and how ag operations will evolve in the mid to the long term. That's why our innovation team has that focus.

One more question from [ Luana ] via WhatsApp. What are the best options in the market in terms of debt, thinking about financial cost currently for the company?

Thank you, Luana, for the question. Well, the company is a safe haven to banks in time of the crisis. We always have the opportunity of having good transactions with low costs. Transaction is a bilateral negotiation with the banks. The rates are good. We also have the choice of creating a CRA, which is a long-term process. Also on our radar screen, and there is an array of debts in dollars. That's also an option, the dollar at the current level. We might raise money in dollars. IFC is knocking on our doors. So we have alternatives. Resources are not a problem. I can assure you.

Thank you, Ivo. We have one last question sent via WhatsApp by [ Jesenia Santos ]. Question goes to Pavinato. In one sentence, what do you believe defines the success at SLC, a success culture?

In one sentence, that success culture is developed. So you must have that culture of success to be successful in your operation.

Thank you, Pavinato. Well, Undoubtedly, it's been a very special afternoon to us all, but we must come to an end. Thank you very much for joining us today and for your participation. I'd like to remind you that the questions that were not answered today will be answered by email by our Investor Relations area. Thank you very much and hope to see you next time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]