July, 2012 Presentation 1 BrasilAgro Brazil competitive - - PowerPoint PPT Presentation

BrasilAgro Presentation July, 2012

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Brazil competitive advantages BrasilAgro Farmland Investment

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Farmland Investment

BrasilAgro

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Short summary on BrasilAgro

Company created to implement the Cresud’s successful business model in Brazil: capable of profiting from the commodities production and from the land appreciation BrasilAgro went public in 2006 at BMF&Bovespa Stock Exchange (“Novo Mercado”) as a business plan (BM&FBOVESPA: AGRO3) Launch of the Level I ADR Program in 2010 (Ticker: BRCPY) We have accumulated a portfolio of 180 thousand hectares until now, all in cerrado region faraway from Amazon biome. We have started our farming operations in 2007/08 crop , since then we have developed 61.8 thousand ha and we cultivated 58.1 thousand ha during 2010/11 crop representing a CAGR of 34%. Until now we have sold two farms; one with an appreciation of 112% and other with an appreciation of 156%. According to Delloite independent valuation (Dec/10), BrasilAgro’s properties had an appreciation of 111,1% since acquisition.

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Shareholders structure

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Mercado Cresud was founded in 1935, went public in Buenos

Aires stock exchange in 1960 and on Nasdaq in 1997 One of the largest holders of farmland in Argentina: over 650 thousand ha in 20 properties located in one of the most fertile areas in the world Over 850 thousand hectares under management in Argentina, Bolivia and Paraguay 30 plus years of track record in the agribusiness sector/rural real state. Sold 17 farms in the last 8 years averaging appreciation over 100% Producer of soybean, corn, wheat, sunflower, beef and milk Value drivers: agricultural activities and complementary rural real estate operations Market

Main farmland related investments alternatives in Brasil: four different business models

Potential business models

Lease and Plant Land Acquisition and Development Acquire and Plant Acquire and Lease Risk Return

Low High

• Investor leases the

property from third parties

• Does not benefit from

farmland price appreciation

• Agricultural operational

gains

• Low committed capital
• Investor buys a

productive land and

• perates it
• Benefits from farmland

price appreciation

• Agricultural operational

gains

• High committed capital
• Investor buys a

productive land and lease it to third parties

• Benefits from

farmland price appreciation

• Leasing incomes
• High committed

capital

• Investors buys a raw

land, develop and

• perates it
• Benefits from farmland

price appreciation

• Agricultural operational

gains

• Benefits from land

transformation

• Medium committed

capital

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BrasilAgro business model

The company has a unique business model that creates value through real state appreciation and agricultural production

Raw Land Cattle Forestry Grains Sugarcane

Land value

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Management Expertise

Land Transformation The land development creates value by itself, regardless the farmland price appreciation

Value generation

Cash flow operations The state of art agriculture allow us to generate a strong

• perational cash flow

Baseline appreciation Any farmland price appreciation should generate a positive impact

1 2 3

Grains 68% Forestry 13% Cattle 10% Sugarcane 8%

180,462 ha

Farmland portfolio of 180 thousand ha

BrasilAgro has a diversificated portfolio reducing operational and financial risks

PRODUCTION CAPACITY (Ha)

Grains and Cotton Sugarcane Beef / Cattle Forestry Total area (1): 123,548 ha Production area (2): 87,783 ha Location: Piauí, Bahia and Maranhão Total area: 14,868 ha Production area (2): 10,871 ha Location: Goiás, Mato Grosso Total area: 17,799 ha Production area (2): 14,237 ha Location: Bahia Total area: 24,247 ha Production area (2): 19,004 ha Location: Minas Gerais

NOTE 1: 7.699 ha is a partnership for agriculture exploration with a purchase

• ption on properties in the state of Bahia

NOTE 2: Potential production area for BrasilAgro as estimated by the Company

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Potentially productive 73% Environmental reserve 27%

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Asset Valuation

(1) As of 12/31/2010 (2) BrasilAgro has purchase option in the “Partnership I Farm” with fixed price (3) Engenho and São Pedro farms was already sold (4) Sale price .

1 2 3 5 6 4

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10 11 8 9

3 4 1 2 5 6 7 8

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Properties Location Acquisition date Project Total area Acquisition value Capex Acquisition + capex Delloite valuation(1) Appreciation ha R$ MM R$ MM R$ MM R$ MM % Cremaq

• B. Gr. do Ribeiro/PI

Out / 06 Grains 32.702 42,0 48,4 90,4 191,2 112% Jatobá Barreiras/BA Mar / 07 Grains 31.606 33,0 25,7 58,7 156,5 167% Alto Taquari Alto Taquari/MT Ago / 07 Sugarcane 5.186 33,2 0,1 33,3 64,1 92% Araucária Mineiros/GO Abr / 07 Sugarcane 9.682 70,4 0,8 71,2 134,5 89% Chaparral Correntina/BA Nov / 07 Grains 37.182 47,8 15,9 63,7 144,5 127% Nova Buriti Januária/MG Dez / 07 Forestry 24.247 21,5 0,4 21,9 22,2 1% Preferência Barreiras/BA Set / 08 Pasture 17.799 9,5 8,8 18,3 25,4 39% Horizontina Tasso Fragoso/MA Abr / 10 Grains 14.359 37,7 5,8 43,5 53,5 23% Partnership I (2) Jaborandi/BA set/11 Grains 7.699

• Total

180.462 295,1 105,9 401,0 791,9 97% Engenho(3) Maracaju / MS Jan / 07 2.022 10,2 10,2 21,6(4) 112% São Pedro(3) Chap.do Céu/GO Set / 06 2.447 9,9 0,2 10,2 26,1(4) 156%

Land acquisition/transformation

• High expertise to perform technical,

environmental and legal due diligence before the acquisition

• Enabled team to obtain

environmental permits to clean the area

• Well structured operational process

to clean and prepare the area to be cultivated

• Access to subsidized credit lines to

finance the development capex Land acquisition evolution (ha)

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Developed area (ha)

180,000 ha of land acquired and 61.8 ha transformed into grains, sugarcane and pasture areas.

Land acquisition / transformation

37,2 107,9 17,8 0,0 14,4 2006 2007 2008 2009 2010

7.792 23.107 41.079 61.790 07/08 08/09 09/10 10/11

• State of the art producing

technology

• Strongly skilled team capable of

making the best strategic decision regarding the crop

• Management model based on a

strong leadership on site

• We operate our farms by
• utsourcing all machinery

processes

• Access to subsidized credit lines

to finance the Company’s working capital

2011/12 crop planted area breakdown

Operational capabilities

• Sophistication and efficiency in

products commercialization

• Benefits from gains of scale
• Deep understanding of the

commodities markets gives us the ability of developing pricing strategies capable of benefiting from market trends and volatility

• The monitoring of the hedging

position and exposure is made through advanced controlling tools Diversification Operational Commercialization

A unique combination of diversification, operational skills and commercialization capabilities…

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Our operational controlling toll comprehend all agricultural operational process: (i) planting, (ii) soil fertilizing, (iii) chemical spray and (iv) harvest BrasilAgro management team consolidate sophistication, technology and field knowledge Sample of controlled items:

• Distance between planted seeds
• Number of planted seeds per meter
• Fertilizer portion per meter
• Chemical spray: number of

drops per cm²

• Harvest: wasted grain

per hectare

• Among others
• Efficient cost control tool
• Integrated process through SAP

that reaches the farm level

• Quarterly auditing

procedure on accounting reports and process

Operational capabilities

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Deep knowledge of Brazilian farmland landscape

Undisputed leadership in the rural real estate scenario with a proven track record BrasilAgro’s rigorous acquisition process confers a unique competitive advantage to quickly deploy the capital

Number of visited farms Total area of the farms for sale (thousand ha) Number of farms for sale Number of farms where we performed technical due diligence

MM ha Primary analysis 22.0 Site visit 2.5 Detailed due diligence 1.0

230 6 3 111 6 14 6,533 250 4 21 4 2,500 11 230 6 12 1,000 128 3 20 1,190 93 5 2,6 2 2 156 44 2,2 1 1,8 1 14 1,300 62 4 56 4,060 95 16 10 851 38 1 8 1,000 126 2 230 6 230 6 3 111 6 3 111 6 14 6,533 250 4 16 7,759 255 6 21 4 157 2 2,500 11 2,536 11 230 6 1 749 98 12 1,000 128 3 12 1,020 128 4 20 1,190 93 5 23 1,261 119 8 2,6 2 2,6 2 2 156 44 2 156 44 2,2 1 2,2 1 1,8 1 14 1,300 62 4 21 1,510 54 9 56 4,060 95 16 57 4,167 158 17 10 851 38 1 12 955 42 2 8 1,000 126 2 10 1,231 87 2 18,7 5

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3 Deep knowledge on Brazil´s farmland scenario Experienced team to select the best acquisition opportunities.

Case Study – Cremaq Farm

18.8 thousand ha in native vegetation 3.0 thousand ha with grains 5 workers houses (practically destroyed) 2 supplies warehouses (practically destroyed) 1 main house 1 lunch room At Acquisition Current 19.7 thousand ha with grains (soybean, corn, rice and cotton) Storage facility for 1,2 million bags

• f soybean/corn

205 Km of roads, of which 37 km of gravel roads (suitable for heavy weight trucks) 120 - 180 direct employees Baixa Grande Ribeiro PI Land: R$42.0mm In the same period, average land appreciation in Brazil was 61% Acquisition (Oct-06) Valuation (Dec-10) Market Value: R$191.2 mm Appreciation: 112 % Capex (to Dec-10) Capex: R$48.3 mm 14

24.3 thousand ha of total arable area corresponding to 5.7 thousand ha of native vegetation and 18.6 thousand of harvested forest Few practically destroyed buildings At Acquisition Current 10.9 thousand ha with grains 182 Km of internal roads 220 – 280 direct employees Jaborandi BA Land: R$33.0 mm In the same period, average land appreciation in Brazil was 46% Acquisition (Mar-07) Valuation (Dec-10) Market Value: R$156.50 mm Appreciation: 167% Capex (to Dec-10) Capex: R$25.6 mm

Case Study – Jatobá Farm

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Operational Results

Planted area (ha)

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Planted Area 2011/2012 Harvest Year

Planted Area Sugarcane Soybean Corn Pasture Cotton Winter Crop Total Cremaq Farm 15.877 3.852 996 20.725 Jatobá Farm 7.065 3.134 772 10.971 Alto Taquari Farm 3.555 3.555 Araucária Farm 5.445 5.445 Chaparral Farm 9.054 1.106 10.160 Nova Buriti Farm Preferência Farm 5.100 5.100 Horizontina Farm 4.319 1.255 840 6.414 Partnership I Farm 4.614 526 5.140 Total 9.000 40.929 8.767 5.100 1.878 1.836 67.510

22.060 35.504 46.140 58.191 67.510

07/08 08/09 09/10 10/11 11/12

Financial Results FY’2011/2012

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Adjusted EBITDA (R$’000) EBITDA (R$’000)

3Q12 3Q11 Change 9M12 9M11 Change Gross profit (loss) 3.199 12.475

• 75,8%

23.544 28.322

• 16,9%

Selling expenses (79) (83)

• 4,8%

(931) (707) 31,7% General and administrative (6.408) (11.233)

• 43,0%

(18.355) (18.956)

• 3,2%

Other operating revenue (5) 1 n.A 16 65

• 75,4%

Depreciations 2.878 1.599 80,0% 11.472 8.240 39,2% EBITDA

• 495

2.759 n.a. 15.746 16.964

• 7,2%

3Q12 3Q11 Change 9M12 9M11 Change Gross profit (loss) 3.199 12.475

• 75,8%

23.544 28.322

• 16,9%

Elimination of gains on biological assets (grains and sugarcane planted) 2.731 (2.052) n.a. 14,912 (8.650) n.a Selling expenses (79) (83)

• 4,8%

(931) (707) 31,7% General and administrative (6.408) (11.233)

• 43,0%

(18.355) (18.956)

• 3,2%

Other operating revenue (5) 1 n.a 16 65

• 75,4%

Hedge results (2,198)

• n.a.

655

• n.a

Depreciations 2.878 1.599 80,0% 11.472 8.240 39,2% Adjusted EBITDA 108 707

• 84,7%

31.313 8.314 276,6%

Net Revenues – BRGAAP (R$ million)

Financial Results

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Net Revenues – IFRS (R$ million) Adjusted EBITDA (R$ million)

9,6 101,3 105,4 2010 2011 9M12 (29,8) 22,3 31,3 2010 2011 9M12 36,7 79,5 103,0 2010 2011 9M12

* nine months ended March 31, 2012.

Brazil competitive advantages

Brazil Competitive Advantages

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Agricultural products ranking

Brazil is among the leading countries in several different agricultural activities, figuring among the top producers and exporters for most of the agricultural products

Soy Corn Coffee Country Production Net Exports Country Production Net Exports Country Production Net Exports USA 1st 1st USA 1st 1st Brazil 1st 1st Brazil 2nd 2nd China 2nd Vietnam 2nd 2nd Argentina 3rd 3rd E.U 3rd 6th Colombia 3rd 3rd China 4th Brazil 4th 2nd Indonesia 4th 4th Índia 5th Mexico 5th Ethiopia 5th 6th Paraguay 6th 4th Índia 6th Mexico 6th Canadá 7th 5th Argentina 7th 3rd Índia 7th Sugar Meat Orange Juice Country Production Net Exports Country Production Net Exports Country Production Net Exports Brazil 1st 1st China 1st Brazil 1st 1st Índia 2nd USA 2nd 2nd USA 2nd E.U 3rd 4th Brazil 3rd 1st E.U 3rd China 4th Germany 4th 4th Mexico 4th 2nd Thailand 5th 2nd France 5th South Africa 5th USA 6th Índia 6th China 6th Mexico 7th Spain 7th Australia 7th 20

The great amount of available arable land along a great rainfall level gives Brazil an unbeatable combination. Brazil has the potential to more than double its grain area only by converting pastures alone

Agricultural farmland potential in Brazil

851 420 15 84 29 304

150 300 450 600 750 900 Total area Amazon forestry Pantanal Dry land Indian reserve and conservation units Avaiable land 119,9 78,8 104,9 Pastures Arable area Raw land

BRAZILIAN TOTAL AREA BREAKDOWN (In million ha ) BRAZILIAN TOTAL AREA BREAKDOWN (In million ha )

Source: Embrapa and FNP ¹ According to our estimates, roughly 70% of total raw land area have to destined to legal reserves and can not be used for agriculture Source: Embrapa and FNP

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8,233 4,507 3,051 2,902 2,838 2,830 2,132 1,913 1,897 23,563

World supply of fresh water

Source: FAO

Renewable Water Resources (bn m³/yr)

Total = 55,149 NY004JD1 NY004JD1 NY004JD1

Others % World's North America South America Europe Africa Asia Australia & Oceania Water 15% 26% 8% 11% 36% 5% Population 8% 6% 13% 13% 60% 1% Ratio 1,9x 4,3x 0,6x 0,8x 0,6x 5,0x

Regions with abundance of fresh water in excess of population needs have a favorable position by exporting water in the form of commodities

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BrasilAgro

Farmland Investment

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Farmland, as an asset class, distinguishes itself among other alternatives as having an

• utstanding risk/return profile

Farmland Investment

Source: Bloomberg, USDA, Damodaran and BrasilAgro analysis NOTE 5: Data on Farmland – USA considers only the land prices and is back to 1967. NOTE 6: Data on Farmland (TR – Total Return) – USA considers the land prices and an hypothetical leasing and is back to 1967. NOTE 7: Data on S&P 500 (TR – Total Return): 1936-2008. NOTE 1: Data on Agricultural, Metals and Energy Index: 1999-2008. NOTE 2: Data on T-bill 10Y: 1927-2008. NOTE 3: Data on Debt Bonds 7-10 y: 1992-2008. NOTE 4: Data on Housing Prices: 1988-2008.

RISK & RETURN

Farmland - USA Farmland (TR) - USA T-bill 10Y Debt bonds 7-10Y Housing prices S&P 500 (TR) Agricultural index Energy index Metals index 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0% 18,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% Return Risk

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500 1.000 1.500 2.000 2.500 3.000 3.500 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 AVG Farmland price (US$ / Acre)

Farmland prices

Source: USDA, U.S. Bureau of Labor Statistics

US CORN BELT FARMLAND PRICES IN REAL TERMS

Mature farmland prices have increased in real terms over time

Given that there has not been any transformational change in the farms, why is there a “baseline” appreciation?

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Commodity price is not the value driver for farmland price appreciation

Farmland price value drivers

Source: Bloomberg, USDA

SOYBEAN PRICES & US CORN BELT FARMLAND PRICES IN REAL TERMS (1988 = 100)

20 40 60 80 100 120 140 160 180 200 220 240 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Soybean prices Farm prices

Historically, farmland prices have consistently outperformed soybean prices

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Farmland price value drivers

The high correlation between soybean and fertilizers indicates that higher soybean prices does not reflect on higher cash flow per hectare and vice versa

400 600 800 1000 1200 1400 1600 1800 100 200 300 400 500 600 700 800 900 1/2/1995 1/7/1995 1/12/1995 1/5/1996 1/10/1996 1/3/1997 1/8/1997 1/1/1998 1/6/1998 1/11/1998 1/4/1999 1/9/1999 1/2/2000 1/7/2000 1/12/2000 1/5/2001 1/10/2001 1/3/2002 1/8/2002 1/1/2003 1/6/2003 1/11/2003 1/4/2004 1/9/2004 1/2/2005 1/7/2005 1/12/2005 1/5/2006 1/10/2006 1/3/2007 1/8/2007 1/1/2008 1/6/2008 1/11/2008 1/4/2009 1/9/2009 1/2/2010 NPK (U$ / ton.) Soybean price (cts / bu)

SOYBEAN PRICE & FERTILIZERS PRICE

Source: Bloomberg

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The main driver pushing farmland prices upward is the increasing world grain area

Farmland Investment

Higher demand for grains Not enough growth in productivity New areas in production Productivity Producing cost Commodity price Combination of factors to make the new areas economically viable Higher cash flow to all agricultural area New production areas have higher producing cost in $ per ton Higher farmland prices

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The main factor pushing farmland prices upward is the world production area increase

WORLD PRODUCTION AREA & CORN BELT FARMLAND PRICES (US)

Source: USDA, FAO

Given that new areas have higher production cost (USD / Ton), the expansion on the world agricultural area requires a combination of factor (price, cost, productivity) capable to generate a positive cash flow to this newly

• pened areas. This same combination of factors should increase the earnings and , therefore, the farmland prices

for agricultural area as a whole.

Farmland price value drivers

540.000 560.000 580.000 600.000 620.000 640.000 660.000 1.300 1.500 1.700 1.900 2.100 2.300 2.500 2.700 2.900 3.100 3.300 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 AVG Farmland price (US$ / Acre) World Production Area (ha) 29

Meat demand¹ is highly correlated with per capita GDP – higher levels of income provides richer protein diets

Higher demand for food

y = 15,10ln(x) - 78,51 R² = 0,655

20 40 60 80 100 120 140

5.000 10.000 15.000 20.000 25.000 30.000 35.000 40.000 45.000 50.000

¹ I’s worth notice that approximately: 1.3 and 5.4 kilogram of soybean and corn, respectively, are needed to produce 1 kg of beef; 0.7 and 2.5 kilogram of soybean and corn, respectively, are needed to produce 1 kg of pork; 0.6 and 1.1 kilogram of soybean and corn, respectively, are needed to produce 1 kg of poultry.

MEAT PER CAPITA CONSUMPTION IN 2003 In kg / capita / year and US$ per capita / year

Source: FAO, USDA and BrasilAgro analysis

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Demand for food will remain rising as developing countries drive the world economic growth

22% 25% 47% 60% 78% 75% 53% 40% 1980-1990 1991-2000 2001-2007 2008-2014 (E) Countries with GDP per capita < US$ 10.000 Countries with GDP per capita > US$ 10.000

According to IMF projections, countries with GDP per capita of less than US$10,000 will be responsible for more than 60% of world GDP growth for the next 6 years;

WORLD GDP GROWTH BREAKDOWN (In %)

Source: IMF

Higher demand for food

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Productivity growth has not been enough to offset the increasing demand. This shortage is expected to increase within the next ten years

Source: FAO, USDA and BrasilAgro analysis

Productivity growth vs demand growth

PRODUCTIVITY GAINS (% p.y)

2,19% 1,28% 0,63% From 1967 to 1987 From 1987 to 2007 From 2007 to 2018

PRODUCTION GROWTH (% p.y)

2,76% 2,00% 2,09% From 1967 to 1987 From 1987 to 2007 From 2007 to 2018

NOTE 1: 2018 scenario is based on USDA projections

0,55% 0,71% 1,45%

AGRICULTURAL AREAS INCREASE (% p.y)

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Within the next ten years more than 60% of the world increasing in grain production should came from new opened areas

WORLD GRAIN PRODUCTION INCREASE BREAKDOWN BY SOURCE

Need for new areas to be developed

Source: FAO, USDA and BrasilAgro analisys

24,3% 39,4% 61,2% 75,7% 60,6% 38,8% From 1967 to 1987 From 1987 to 2007 From 2007 to 2018 Productivity Gain Increase in area

Increase of 108 mm ha

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Contacts

Julio Toledo Piza

julio.piza@brasil-agro.com BrasilAgro - Companhia Brasileira de Propriedades Agrícolas Avenida Brigadeiro Faria Lima, 1.309

• 5o. Andar - CEP 01452-002

São Paulo - SP – Brazil Telephone: +55 (11) 3035-5350 Fax: +55 (11) 3035-5366 www.brasil-agro.com CEO and IR Officer

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Ana Paula Ribeiro

ana.ribeiro@brasil-agro.com BrasilAgro - Companhia Brasileira de Propriedades Agrícolas Avenida Brigadeiro Faria Lima, 1.309

• 5o. Andar - CEP 01452-002

São Paulo - SP – Brazil Telephone: +55 (11) 3035-5374 Fax: +55 (11) 3035-5366 www.brasil-agro.com Investor Relations