SLC Agrícola S.A.

For 1H26, SLC Agricola reported record net revenue of BRL 4.4 billion, up 6% year over year. Gross profit increased 8.8% to BRL 1.9 billion, and adjusted EBITDA totaled BRL 1.3 billion, down 15% versus first half 2025. The soybean harvest was completed with a record average yield of 4,146 kilograms per hectare, 4.7% higher than the prior cycle and 2.7% above initial projection; management said cotton yields are expected to be about 12% above last year and corn yields about 6,798 kilograms per hectare. Adjusted net debt ended the quarter at BRL 7.5 billion and leverage at 3.09x adjusted EBITDA. For the next crop, management said it has already secured 100% of phosphate, 90% of potassium chloride, 70% of nitrogen, and 96% of crop protection, and it has hedged 49.2% of soybeans and 55% of cotton, including committed volumes.

Aurelio Pavinato framed the quarter around favorable commodity fundamentals for cotton, soybeans, and corn, while stressing that SLC is managing climate and price risk through agronomic adjustments and hedging. He said the company is preparing for a strong El Nino with more soil coverage, less tillage, adjusted planting windows, and split fertilizer applications, and pointed to 25,000 hectares under irrigation in higher-risk areas as a major mitigation tool. His tone was confident on operations and medium-term market support, saying the company believes commodity prices are past the trough and that 2027 margins should improve.

Ivo Brum said the first half was supported by higher sales volumes across cotton, soybeans, corn, and cattle, with gross profit improving and EBITDA pressured by lower gross profit from soybeans and cotton seeds plus higher SG&A. He highlighted BRL 155 million of irrigation CapEx in 1H26, adjusted net debt of BRL 7.5 billion, and leverage of 3.09x, saying the increase reflects growth, working capital, and investment. He also said 78% of debt is long-term, the company expects leverage to trend down as harvest cash comes in, and that it may consider dollar-denominated borrowing to lengthen the debt profile given interest rates around 6% to 7% in dollars.

Analysts focused on three areas: weather risk, leverage, and capital allocation. Management said it is mitigating El Nino with more soil coverage, adjusted planting windows, irrigation, and more flexible fertilizer timing, and noted the system is more resilient than in 2016 because there is far more irrigation and all areas are mature land now. On leverage, management acknowledged 3.09x is slightly uncomfortable but said it was planned, that debt should decline with second-half cash generation, and that potential land sales could reduce leverage, though they prefer sales without leaseback and only if they find the right buyer. Questions also covered fertilizer timing, freight/SG&A, and whether they would shift crop mix toward cotton; management said fertilizer was bought at favorable points, SG&A was inflated by nonrecurring transaction costs and integration items, and future planting decisions will remain farm-by-farm and economics-driven.