Cresud S.A. — FY2021 Form 20-F summary
Reporting period: Fiscal year ended June 30, 2021, with comparisons to FY2020 and FY2019. Despite the request metadata referring to “2020 Q4,” this filing is an annual report, not a quarterly filing. Financial statements are audited, prepared under IFRS, and inflation-adjusted for Argentina’s hyperinflationary economy; amounts below are mainly in ARS millions unless noted.
Business context and key financial metrics
Cresud operates agricultural businesses across Argentina, Brazil, Bolivia and Paraguay, and urban property and investment businesses principally through IRSA, including shopping malls, offices, hotels and development properties. The FY2021 comparison is materially affected by the loss of control of IDBD and DIC in September 2020; the filing retrospectively restates comparatives for that deconsolidation.
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | 42,411 | 51,068 | Down 17.0% |
| Gross profit | 22,456 | 22,257 | Up 0.9%; reported gross margin 39% versus 40% |
| Operating profit | 9,924 | 66,743 | Down 85.1%; FY2020 included a large investment-property fair-value gain |
| Financial results, net | 6,206 gain | 30,733 loss | Improved principally due to foreign-exchange and financial-asset valuation results |
| Income tax | 27,940 expense | 11,948 expense | Higher expense |
| Net result, including discontinued operations | 24,502 loss | 30,042 profit | Parent-attributable result was a 12,569 loss, versus 5,901 profit |
| Operating cash flow | 8,886 | 53,672 | Lower; includes continuing and discontinued operations |
| Investing cash flow | 73,657 inflow | 60,547 inflow | Included investment-asset sales and financial-asset activity |
| Financing cash flow | 54,165 outflow | 109,082 outflow | Debt repayments and interest were major uses |
| Cash and cash equivalents at year-end | 27,529 | 151,591 | FY2021 balance reflects, among other factors, deconsolidation of IDBD |
| Total assets / equity | 339,172 / 105,893 | 1,031,784 / 183,475 | Sharp declines substantially reflect IDBD/DIC deconsolidation |
| Borrowings | 118,668 | 629,048 | FY2020 included Israel operations later deconsolidated |
| Current assets / current liabilities | 69,981 / 70,427 | 346,997 / 259,637 | Current ratio 0.99 versus 1.34 |
| Capital expenditures | 4,487 | 18,567 | Lower year over year |
The filing reports operating margin of 18% for FY2021 versus 119% for FY2020 and net margin of negative 43% versus positive 54%, using its stated denominator that includes agricultural fair-value gains at harvest. These measures are affected by substantial non-cash valuation movements.
Material changes versus FY2020
- Agricultural business segment operating profit rose to ARS 15,872 million from ARS 9,851 million. Land transformation and farmland sales contributed ARS 8,529 million of FY2021 operating profit, versus ARS 3,831 million.
- Urban properties and investments segment revenue fell to ARS 10,114 million from ARS 16,731 million, and operating results shifted to a loss of ARS 5,732 million from profit of ARS 57,657 million. Investment-property fair-value results moved to a loss of ARS 2,246 million from a gain of ARS 51,040 million.
- Shopping malls recorded an operating loss of ARS 17,895 million, compared with income of ARS 2,617 million. Hotel operations also moved to a loss of ARS 723 million from income of ARS 243 million.
- Shopping mall tenant sales were ARS 75,795 million, down 27.8% in real terms year over year; portfolio occupancy was 89.9%, versus 93.2%.
- Crop production volume fell to 776,233 tons from 857,490 tons; sugarcane production was broadly flat at 2,364,535 tons. These operating volumes and the reported peso financial results are affected by inflation and foreign-exchange movements.
Outlook, management commentary, risks and unusual items
- COVID-19: Agricultural operations continued. Shopping centers in the Buenos Aires metropolitan area were closed from April 16 to June 11, 2021, with essential services permitted; management attributed a 40.3% revenue impact to pandemic-related closures in FY2021. Hotels operated at low occupancy, and convention venues and the DirecTV Arena were closed for much of the year. Management expected gradual recovery in FY2022, but gave no quantified company-wide guidance.
- Deconsolidation and disposals: Following IDBD insolvency and liquidation proceedings, the Group lost control of IDBD and DIC on September 25, 2020 and deconsolidated them. Carnes Pampeanas was sold in February 2021 for USD 10 million, generating an ARS 732 million gain; its results were classified as discontinued operations.
- Debt and currency access: Borrowings were ARS 118,668 million at June 30, 2021, including ARS 45,435 million current and ARS 73,233 million non-current. Debt service is exposed to peso depreciation and restrictions on access to foreign currency. Central Bank rules required refinancing of certain foreign-currency principal maturities; Cresud subsequently issued Series XXXIII notes in July 2021 to refinance part of Series XXV notes.
- Funding after year-end: Cresud issued Series XXXV notes for USD 41.9 million in September 2021, at 3.5% annual interest, maturing in 2024. The March 2021 equity offering raised approximately USD 42.5 million and included 90 million warrants.
- Subsequent farmland sale: Brasilagro agreed in October 2021 to sell 3,723 hectares at Alto Taquari for BRL 589 million, with staged possession and payments indexed to soybean bags over an average 3.9-year term. The sale was subsequent to the reporting date; proceeds and recognition are therefore subject to the disclosed delivery and payment terms.
- Macroeconomic and market risks: Management highlights high Argentine inflation, peso depreciation, exchange controls, political and regulatory uncertainty, commodity prices, weather and crop risks, shopping-mall tenant performance, real-estate valuations and access to financing. Argentina CPI inflation was reported at 50.2% and peso depreciation at 35.9% for the relevant FY2021 comparison.
- Contingencies: The filing reports an estimated ARS 221 million contingency in disputes with Salta Forestal and account seizures ordered in related proceedings. It also describes material property disputes, including Puerto Retiro and the Caballito development injunction. FyO provided brokerage guarantees on merchandise valued at ARS 823 million at year-end; the filing says some counterparties defaulted and the corresponding value was ARS 438 million as of the annual report date.
- Audit and controls: The external auditor issued an unqualified opinion on the consolidated financial statements and concluded internal control over financial reporting was effective as of June 30, 2021. The audit identified Level 3 investment-property valuation using discounted cash flows as a critical audit matter, citing judgment over discount rates and macroeconomic assumptions.
Most important facts for investors to verify
- Reconcile the sharp balance-sheet and debt changes to the September 2020 IDBD/DIC deconsolidation and confirm which comparative figures are restated.
- Review the fair-value assumptions and sensitivity for investment properties, biological assets and farmland, separating non-cash valuation gains or losses from operating cash generation.
- Check debt maturities, refinancing completion, currency denomination and the practical ability to access foreign exchange to meet obligations.
- Track shopping-mall occupancy, rent collections, tenant sales and hotel utilization as pandemic restrictions ease.
- Confirm the timing, payment collection and accounting treatment of the Alto Taquari sale and other farmland disposals after year-end.
- Assess the status and potential financial effect of the Salta, Puerto Retiro and Caballito proceedings, and the brokerage guarantees involving defaulted counterparties.