Cresud S.A.C.I.F. y A. (Cresud Inc.) — Form 20-F Summary
Reporting period: Fiscal year ended June 30, 2022, with comparisons to fiscal years 2021 and 2020. This is an annual report, not a 2021 fourth-quarter filing. Financial statements are audited, prepared under IFRS, and restated for Argentina’s hyperinflation under IAS 29; amounts below are Argentine pesos (ARS) in millions unless stated otherwise.
Business context
Cresud combines an agricultural business across Argentina, Brazil, Paraguay and Bolivia with an urban property and investment business, primarily through its 53.6% interest in IRSA. Activities include crop and sugarcane production, cattle, farmland leasing and sales, shopping malls, offices, hotels, property development and investments. The filing reports an IRSA subsidiary merger effective July 1, 2021, simplifying the real estate group structure.
Financial and operating performance
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | 95,850 | 69,547 | Up 37.8% |
| Gross profit | 42,463 | 36,824 | Gross margin about 44.3% versus 53.0% |
| Operating profit | 43,229 | 16,274 | Operating margin about 45.1% versus 23.4% |
| Net profit / (loss) | 63,000 | (40,179) | Includes non-cash fair-value and financial effects; parent-attributable profit was 37,088 |
| Operating cash flow | 21,807 | 14,573 | Continuing operations; FY2022 cash flow before income tax paid was 23,034 |
| Investing cash flow | 12,894 | 119,929 | FY2021 included substantial discontinued-operation activity |
| Financing cash flow | (37,016) | (87,967) | FY2022 included debt repayments and interest |
| Total assets | 529,227 | 556,183 | Down 4.8% |
| Shareholders’ equity | 206,789 | 173,646 | Up 19.1% |
| Gross borrowings | 141,431 | 194,594 | Down 27.3%; 95,267 due within one year |
| Cash and cash equivalents | 34,911 | 45,143 | Cash declined; reported net decrease was 2,315 |
The Company reported negative working capital of ARS 34,591 at June 30, 2022. Agricultural operations had positive working capital of ARS 11,318, while the Argentine urban properties and investment business had negative working capital of ARS 45,909. Debt fair value was ARS 125,799, below its ARS 141,431 book value.
Material changes versus the prior year
- Agricultural-business revenue rose to ARS 64,408 from ARS 48,813. Crop sales and volumes increased, while higher costs and weaker biological-asset valuation effects contributed to lower agricultural-production segment profit (ARS 10,792 versus ARS 11,000).
- Land-sale gains rose to ARS 5,505 from ARS 2,148, including sales of Alto Taquari and Rio do Meio farmland. Agricultural land transformation and sales segment profit nevertheless fell to ARS 8,791 from ARS 13,985, reflecting lower fair-value gains.
- Urban properties and investment business revenue increased to ARS 25,593 from ARS 16,585. Shopping mall revenue nearly doubled to ARS 17,334 as operations reopened and tenant sales recovered; mall occupancy was 93.1%, up from 89.9%.
- Hotel revenue rose to ARS 4,300 from ARS 1,510 as occupancy recovered, though management said Buenos Aires hotels remained below pre-pandemic occupancy. Office revenue fell to ARS 3,041 from ARS 4,401, partly reflecting property disposals.
- Net fair-value gains on investment properties were ARS 16,583, versus a loss of ARS 3,683. The filing identifies valuation changes as a significant driver of reported results; they are not equivalent to realized cash proceeds.
- Net financial results increased to income of ARS 21,943 from ARS 10,177. The income-tax charge narrowed to ARS 1,977 from ARS 45,817, with the prior-year amount affected by the Argentine corporate tax-rate change and deferred tax.
Outlook, commentary, risks and contingencies
- The filing gives no consolidated financial guidance. Management describes continued agricultural trading growth, customer-service differentiation and digital transformation at FyO; expansion of supplies and regional operations; and exploration of specialty exports. These are stated objectives, not quantified guidance.
- Management identifies persistent Argentine inflation, peso depreciation, exchange controls and constrained access to foreign currency as risks to costs, valuations, debt service, dividends and remittances. Argentina’s CPI inflation was reported at 64.0% for the year ended June 30, 2022.
- Debt and refinancing are material concerns: most debt is dollar-linked or dollar-denominated, exchange-market access is restricted, and most consolidated borrowings were current at year-end. After year-end, Cresud exchanged 86.98% of its Series XXIII notes and issued Series XXXVIII notes at 8.00%, maturing in 2026; remaining Series XXIII principal was USD 14.7 million.
- Agricultural risks include weather, commodity-price volatility, unhedged production, rising fertilizer and input costs, supply disruption related to the Russia-Ukraine conflict, export restrictions, environmental rules and limits on foreign ownership of farmland. The filing says fertilizers and agrochemicals were about 74% of production costs in agricultural activities for the 2021–22 harvest year.
- COVID-19 restrictions had previously closed or curtailed shopping malls, hotels and event venues. By the report date, shopping malls were operating; event venues had resumed operations, but the continuing effects remained uncertain.
- Contingencies include a Salta Province dispute over farmland concession fees, estimated at ARS 284.5 million, with related bank-account attachments. Real-estate projects also face litigation and approval uncertainty, including Costa Urbana, Caballito and Puerto Retiro; the Puerto Retiro investment property had been impaired by 100% in 2019.
- After year-end, management proposed a dividend of up to ARS 3,100 million for Cresud, subject to shareholder approval. IRSA sold the República office building for USD 131.8 million, largely for cash with the balance paid in land; subsequent buyback programs and new debt issuances are also described.
Important facts for investors to verify
- Reconcile the ARS 63,000 million net profit and 45.1% operating margin to fair-value movements, inflation accounting, foreign-exchange results, tax and non-controlling interests; assess cash earnings separately.
- Review the maturity, currency, interest-rate and covenant profile of the ARS 141,431 million borrowings, particularly the ARS 95,267 million due within one year, and the effect of exchange controls on repayment.
- Confirm available liquidity, including unrestricted cash, working-capital needs, refinancing completion and the treatment of proceeds from property and farmland sales.
- Check the status and potential financial impact of the Salta, Costa Urbana, Caballito and Puerto Retiro matters, and confirm whether the proposed Cresud dividend was approved and paid.
- Assess the valuation assumptions for investment properties and farmland, including discount rates, inflation, exchange rates, commodity prices and development approvals. The convenience conversion rate cited by the filing is ARS 125.23 per USD at June 30, 2022; the filing warns this does not imply that pesos could be converted at that rate.