MANAGEMENT REPORT
2021
Management Report 2021
Porto Alegre, March 15, 2022
SLC AGRÍCOLA S.A. (Bovespa: SLCE3;
ADR: SLCJY; Bloomberg: SLCE3BZ; Re-uters: SLCE3.SA), one of world's largest producers of grains and fibers, announc- es today its results for fiscal year 2021. The following financial and operating information is presented in accordance with International Financial Reporting Standards (IFRS). The information was prepared on a consolidated basis and is presented in thousands of Brazilian real, except where stated otherwise.
NOTE: 2020 and 2021 refer to the cu- mulative 12-month periods, from January to December. HA refers to the horizontal percentage variation between two periods and VA refers to the percentage represen-tativeness of the account over a given total.
NOTE: As from July 1, 2021, the Com-pany assumed control of the manage-ment and guidelines of Terra Santa Agro S.A., which became a wholly-owned sub- sidiary of SLC Agrícola S.A. As from 3Q21, the consolidated interim financial state-ments of the Company incorporated the results of Terra Santa Agro S.A. To main-tain comparability between periods, all data for 2020 reflect the combination of
the data reported by SLC Agrícola and Terra Santa Agro in both periods.
Terms:
"Combined Data": sum of the data report-ed by SLC Agrícola S.A. (Consolidated) and of the data reported by Terra Santa Agro S.A. (Parent Company), currently a whol-ly-owned subsidiary of SLC Agrícola S.A.
"Combined 2020": strictly means the sum of the data reported by SLC Agríco- la S.A. (for 2020 - January to December 2020) and of the data reported by Terra
Santa Agro S.A. (Parent Company, for the period from July to December 2020),
currently a wholly-owned subsidiary of SLC Agrícola S.A.
"2020": means the data, based on the consolidated interim financial state-ments, that consider the operations of the Company and of its subsidiaries for the whole of 2020 (January to December).
"2021": means the data, based on the consolidated interim financial statements, that consider the operations of the Com-pany and of its subsidiaries for the whole of 2021 (January to December). As from the third quarter of 2021, Terra Santa Agro
S.A. became a wholly-owned subsidiary.
Talk to IRri@slcagricola.com.br(55) (51) 32307797/7799
Rua Nilo Peçanha, 2900, sala 301 Bairro Boa Vista - Porto Alegre (RS) CEP: 91330-002
Visit our websitehttp://ri.slcagricola.com.brhttps://www.slcagricola.com.br/
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to also read the Integrated Report, which has more information on the company's strategy and per-formance in Environmental, Social and Governance (ESG) aspects.
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Contents
5 Message from Management
8 Profile
10 Awards and recognition
11 Strategy
13 Corporate governance
14 Innovation
15 Risk management
15 Certifications and quality
16 Market overview
16 Commodities
16 Cotton
18 Soybean
19 Corn
21 Operational performance
21 Planted area
21 Yields
22 Production cost
23 Financial performance
23 Income statement analysis
30 Statement of cash flow analysis
32 Dividends
33 Capital markets
34 Hedge position
35 Return indicators
36 ESG
37 Environment
39 Social
40 Governance
41 Additional information
41 Planted area
41 Property valuation
41 Landbank
42 Property portfolio
42 Machinery base and storage vapacity
42 Net Asset Value
43 Debt
44 Independent auditors
44 Submission to Arbitration Chamber
44 Disclaimer
45 Financial statements
REFERENCE INDEX
Figure
Figure 1 | Map of operations ................................................................................................................................................................ 9
Figure 2 | Strategic phases of slc agrícola ..................................................................................................................................... 12
Figure 3 | Corporate governance structure ................................................................................................................................ 13
Figure 4 | Evolution of certified area (thd hectares) ............................................................................................................... 15
Figure 5 | Price variations (select commodities), jan/2020 to Jan/2021 .................................................................... 16
Figure 6 | Cotton prices in international markets vs. Brazil ................................................................................................. 16
Figure 7 | World cotton consumption ............................................................................................................................................ 17
Figure 8 | World cotton supply demand Balance ..................................................................................................................... 17
Figure 9 | Annual cotton exports, Brazil ......................................................................................................................................... 17
Figure 10 | Soybean prices in international market vs. Brazil .............................................................................................. 18
Figure 11 | World soybean consumption ....................................................................................................................................... 18
Figure 12 | Annual soybean exports, Brazil ................................................................................................................................... 19
Figure 13 | Soybean - world supply-demand balance ............................................................................................................ 19
Figure 14 | Corn prices in international market vs. Brazil ...................................................................................................... 19
Figure 15 | Annual corn exports, Brazil ........................................................................................................................................... 20
Figure 16 | World corn consumption .............................................................................................................................................. 20
Figure 17 | Corn - world supply-demand balance .................................................................................................................... 20
Figure 18 | Change in net debt/adjusted EBITDA ratio ......................................................................................................... 31
Figure 19 | Dividend yield ..................................................................................................................................................................... 32
Figure 20 | SLCE3 share performance ......................................................................................................................................... 33
Figure 21 | Evolution in educational level ..................................................................................................................................... 39
Figure 22 | Reports received by the whistleblowing channel ............................................................................................ 40
Figure 23 | Change in adjusted gross debt (R$ thd) ............................................................................................................... 43
Figure 24 | Adjusted gross debt amortization Schedule (R$ thd) ................................................................................... 43
Figure 25 | Adjusted gross debt profile ......................................................................................................................................... 43
Figure 26 | Gross debt adjusted by index and Instrument .................................................................................................. 43
Table
Table 1 | Planted area by crop, 2020/21 vs. 2021/22 .............................................................................................................. Table 2 | Budgeted yields, 2021/22 crop year ........................................................................................................................... Table 3 | Budgeted production cost by crop, 2021/22 crop year ................................................................................... Table 4 | Budgeted production cost in R$/hectare, 2021/22 crop year ..................................................................... Table 5 | Adjusted EBITDA reconciliation ................................................................................................................................... Table 6 | Net revenue ............................................................................................................................................................................ Table 7 | Volume invoiced (tons) ...................................................................................................................................................... Table 8 | Volume invoiced (head) .................................................................................................................................................... Table 9 | Variation in fair value of biological assets ................................................................................................................. Table 10 | Cost of goods sold ............................................................................................................................................................. Table 11 | Realization of fair value of biological assets ........................................................................................................... Table 12 | Gross income - cotton lint ............................................................................................................................................. Table 13 | Gross income - cotton seed ......................................................................................................................................... Table 14 | Gross income - soybean ................................................................................................................................................. Table 15 | Gross income - corn ........................................................................................................................................................ Table 16 | Gross income - cattle ...................................................................................................................................................... Table 17 | Gross income ....................................................................................................................................................................... Table 18 | Selling expenses ................................................................................................................................................................. Table 19 | Administrative expenses ................................................................................................................................................ Table 20 | Adjusted net financial income (expense) ............................................................................................................. Table 21 | Net income ............................................................................................................................................................................ Table 22 | Summarized cash flow .................................................................................................................................................... Table 23 | Capital expenditures ....................................................................................................................................................... Table 24 | Financial net debt ............................................................................................................................................................. Table 25 | Proposed distribution of net income ..................................................................................................................... Table 26 | Hedge position ................................................................................................................................................................... Table 27 | Return on equity ................................................................................................................................................................ Table 28 | Return on invested capital ........................................................................................................................................... Table 29 | GHG inventory .................................................................................................................................................................... Table 30 | Water withdrawal by source ........................................................................................................................................ Table 31 | Solid waste disposal by destination ........................................................................................................................... Table 32 | Planted area, 2021/22 crop year ................................................................................................................................ Table 33 | Landbank ............................................................................................................................................................................... Table 34 | Property portfolio .............................................................................................................................................................. Table 35 | Machinery base and storage capacity .................................................................................................................... Table 36 | Net asset value (nav) ........................................................................................................................................................
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Message from Management
Noteworthy and challenging, the year 2021 was marked by growth and record-high re-sults! Our Big Dream, "To po-sitively impact future generations and be the world leader in agricultural efficiency and respect for the planet," guided us on a clear and well-defined strategy with a long-term vision, showing us who we are and where we aspire to go.
We navigated another year marked by the pandemic, but were better prepared and stronger, thanks to the lessons learned from the epidemic that forced the world to adapt to new ways of interrelating and communicating.
More than ever, interconnected value creation through human, natural, manu-factured, financial, intellectual, social and relational capital are indispensable for the sustainability and longevity of businesses.
Our strategy is based on strong pillars to support the Company's growth.
The first pillar is Asset Light Growth. In 2021, we carried out two important trans-actions: the business combination with Ter-ra Santa Agro S.A. and the lease agreement with Agrícola Xingu S.A.
The business combination with Terra Santa Agro S.A. expanded the Company's portfolio of leased planted areas by 145,000 hectares of mature areas in Mato Grosso, a key state in terms of Brazil's agricultural production. The transaction was concluded in July with payment of net consideration of R$193.0 mil-lion and goodwill of R$47.4 million, and the lease agreement is long term (20 years). On November 1, 2021, the Extraordinary Share-holders Meeting approved the change in the corporate name of Terra Santa Agro S.A. to SLC Agrícola Centro-Oeste S.A. The transi-tion of people and processes, which is critical in transactions of this size, was successful. We kept turnover within the projected rate and were able to maintain operational efficiency.
We entered into a lease agreement with Agrícola Xingú that expanded our total area by 39,034 hectares, divided between the municipalities of Correntina/BA (34,284 hectares) and Unaí/MG (4,749 hectares), with potential planted area of 45,000 hect-ares. Already developed and permitted, the areas will be planted with grains and cot-ton. The term of the agreement is fifteen (15) years for the areas in Bahia and ten (10) years for the areas in Minas Gerais.
More recently, in February 2022, we also announced a partnership with Kothe Lo-gistica S.A. for the construction of a seed processing unit ("UBS") and refrigerated storage in Mato Grosso. The Company sold 29 hectares of the Paiaguás Farm to Kothe on which the UBS will be built. Investments in construction are the responsibility of Kothe, whose relationship with the Compa-ny will consist of providing seed processing and storage services. The UBS will reach in-stalled production capacity of 1 million bags of soybean within five years. This partner-ship will leverage our seed business, which has been delivering significant growth and creating value for our shareholders.
Our second pillar of efficiency and ex-panding our lead in relation to the indus-try average also was responsible for very positive deliveries. In 2021, we ended the 2020/21 crop cycle with a record soybean yield of 3,985 kg/ha, setting a new record for the fourth straight year and coming in 6.2% above our initial projection and 13.0% above the national average (CON-AB, Feb/22). First and second crop cotton ended the crop year with an average yield of 1,848 kg/ha, or 0.3% below the initial es-timate, but 5.3% higher than in the 2019/20 crop year and 7.4% above the national average. Meanwhile, second crop corn achieved a yield of 5,880 kg/ha, 22.5% be-low our initial estimate, but 45.2% above the national average (CONAB, Feb/22). Given the decline in the national average yield for corn, market prices increased and the Company's corn crop achieved the expect-ed financial result. The lower yield for corn is mainly due to the irregular distribution of precipitation in March and April, especially at the farms in Mato Grosso do Sul.
We started the 2021/22 crop year in Sep-tember 2021 with growth of 45.8% in plant-ed area. In addition, the second crop plant-ed area expanded by 33.6%, which further confirms our strategy of using own and leased assets under our control, on mature and strategically located properties, to sup-port high production potential and reduce exposure to weather risks.
We made progress in the four pillars of our strategy. Important contracts for the growth of operations, advances in crop productivity, record financial results and achievements that
Financial solidity and creating value for strengthen our ESG
shareholders is the third pillar of our strat-egy, and we ended 2021 with new records in all our key financial indicators. Adjusted
positioning internally and for the market stand out
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SLC Agrícola SA published this content on 09 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 May 2022 20:38:28 UTC.