20-F: BrasilAgro Reports Profit Decline Amid Rising Costs, Debt

BrasilAgro reported a significant 39% drop in net income for fiscal year 2025 to R$138 million, despite a 13.8% increase in net revenue, driven by higher financial expenses and reduced farm sale gains.

Summary

• Net revenue increased by 13.8% to R$877.4 million in fiscal year 2025, up from R$771.1 million in 2024.
• Net income for the year decreased significantly by 39.2% to R$138.0 million in 2025, down from R$226.9 million in 2024.
• Gain on sale of farms decreased by 27.5% to R$180.1 million in 2025, compared to R$248.4 million in 2024.
• Changes in fair value of biological assets and agricultural products saw a substantial gain of R$122.7 million in 2025, a 202.9% increase from R$40.5 million in 2024.
• Total indebtedness (loans, financing, and debentures) rose by 29.9% to R$885.5 million in 2025 from R$681.9 million in 2024.
• Cash and cash equivalents decreased to R$142.9 million in 2025 from R$170.9 million in 2024.
• Dividends per share decreased to R$0.75 in 2025 from R$1.51 in 2024.
• Acquired Companhia Agrcola Novo Horizonte S.A. in August 2024 for R$36.4 million, adding a 4,767-hectare lease for 16 years.
• Sold the entire 17,799-hectare Preferencia Farm in June 2025 for R$140.0 million.
• Entered into a new long-term agricultural partnership for Estrela do Guapore Farm (3,081.9 hectares for 13 years) in August 2025.

Sentiment

Score: 4

Explanation: While revenue growth and strategic expansions are positive, the significant decline in net income, increased financial expenses, and reduced farm sale gains indicate a challenging year for profitability. The company faces numerous macroeconomic and geopolitical risks that could further impact future performance.

Positives

• Net revenue increased by 13.8% to R$877.4 million, driven by strong performance in sugarcane and grain sales.
• Sugarcane revenue grew by 36.3% to R$322.2 million, with increased sales volume and a higher Total Recoverable Sugar (TRS) price.
• Grain sales revenue increased by 5.1% to R$431.9 million, primarily due to a 16% increase in soybean sales volume and an 8% reduction in unit costs.
• Significant increase in the fair value of biological assets and agricultural products, rising by 202.9% to R$122.7 million, reflecting operational improvements and higher commodity prices.
• Strategic acquisition of Novo Horizonte Agricultural Company, enhancing presence in a key agricultural region with irrigated land, expected to boost production capacity and efficiency.
• Establishment of a Data Protection Committee and ongoing investments in cybersecurity measures to enhance system security and data governance.
• The Agro-Environmental Court annulled a resolution that had declared the illegality of possession for 4,435.1 hectares of the Acres del Sud farm, a favorable development in a legal proceeding.

Negatives

• Net income for the year decreased by 39.2% to R$138.0 million, primarily due to reduced gains from farm sales and increased net financial expenses.
• Gain on sale of farms decreased by 27.5% to R$180.1 million, contributing to the overall decline in profitability.
• Financial results shifted from a net income of R$5.7 million in 2024 to a net expense of R$80.4 million in 2025, mainly due to increased indebtedness and negative adjustments in lease agreements and derivatives.
• Cattle-raising revenue decreased by 13.9% to R$25.5 million, attributed to lower beef production in Brazil due to drought and a strategic shift to full-cycle operations in Paraguay.
• Total consolidated indebtedness increased by 29.9% to R$885.5 million, raising concerns about leverage.
• Cash flows from operating activities decreased to R$71.5 million in 2025 from R$79.4 million in 2024, partly due to a strategy to retain soybean inventory and larger negative adjustments in biological asset fair value.
• Dividends per share decreased from R$1.51 in 2024 to R$0.75 in 2025, impacting shareholder returns.

Risks

• Ability to acquire, develop, operate, and sell agricultural properties profitably is uncertain and subject to market conditions.
• Restrictions on land acquisition by foreign nationals in Brazil, with ongoing legal challenges, could substantially limit future acquisitions and increase transaction costs.
• Agricultural properties are illiquid and volatile, potentially affecting the ability to timely and profitably sell assets.
• Fluctuations in market prices for agricultural products (grains, sugarcane, cattle) due to global supply/demand, weather, trade barriers, and financial speculation can adversely affect revenue.
• High customer concentration, with three customers accounting for 52.9% of 2025 revenue, increases vulnerability to loss or default.
• Dependence on third-party service providers exposes the company to labor claims and joint environmental liability.
• Changes in government policies regarding biofuels could adversely affect the sugarcane business.
• Extensive environmental regulations and potential liabilities for non-compliance or damages.
• Failure to innovate and adopt modern agricultural technologies could adversely affect production and yields.
• Difficulties in implementing investment projects, including higher costs, licensing delays, and competition for land.
• Decline in property prices in Brazil could adversely affect the value of land holdings.
• Inability to retain and attract qualified technical and administrative personnel.
• Adverse weather conditions (droughts, floods, frosts, extreme temperatures) can devastate crops and cattle production.
• Outbreaks of diseases affecting crops (e.g., Asian soybean rust) and cattle (e.g., foot-and-mouth disease) could destroy production.
• Fires and other accidents pose risks to agricultural properties and installations.
• Widespread uncertainties and fraud involving real estate ownership in Brazil could lead to loss of properties.
• Dependence on international trade and economic conditions in key export markets, including tariffs and trade barriers.
• A worldwide economic downturn could weaken demand and lead to lower product prices.
• Fluctuations in the value of the Brazilian real against the U.S. dollar can significantly affect results.
• Use of financial derivative instruments may result in substantial losses if not managed properly.
• Failure in future partnerships and strategic relationships could hinder business expansion.
• Capital control restrictions imposed by Brazilian or foreign governments may adversely affect dividend distributions and capital repatriation.
• Restrictions and difficulties related to the transfer of rural properties in Bolivia and Paraguay.
• Significant shareholders may have interests that differ from other shareholders, leading to potential conflicts of interest.
• Increases in raw material costs (lime, fertilizers, pesticides, seeds) and oil prices (fuel) can reduce profitability.
• Ongoing global conflicts (Russia-Ukraine, Israel-Hamas) can disrupt supply chains, increase input costs, and exacerbate market volatility.
• Risks associated with genetically modified organisms (GMOs) and potential prohibitions on herbicides like glyphosate.
• Lack of adequate transportation, storage, and processing infrastructure in Brazil.
• Intense competition in agricultural product markets, with larger competitors often receiving subsidies.
• Social movements advocating land reform and property redistribution could affect land use or cause damage.
• Political and economic crises, instability, terrorism, civil strife, and expropriation risks in emerging markets where the company operates (Bolivia, Paraguay).
• Cybersecurity incidents, unauthorized disclosure or loss of sensitive information, and failure to comply with data privacy laws can harm operations and reputation.
• Challenges in timely and effectively implementing new sustainability reporting standards (IFRS S1 and IFRS S2) could increase costs and affect investor confidence.
• Brazilian government's significant influence over the economy, including changes in economic policies, tax laws, and interest rates, can adversely affect the company.

Future Outlook

Global soybean production for the 2024/25 crop year is forecast to reach a record 422.3 million metric tons, with Brazil expected to harvest 171.5 million tons. Sales for the upcoming 2025/26 harvest are progressing slowly, with only 19.8% sold as of September 2025, but planting for the new season is underway with expectations of reaching up to 50 million hectares. The company anticipates continued operation in a highly competitive and regulated environment, with expected increases in agricultural input prices (fertilizers and fuel) due to global economic and geopolitical instability.

Management Comments

• The new lease agreement for Estrela do Guapore Farm will enable a significant expansion of our operations.
• The acquisition of Novo Horizonte Agricultural Company strategically enhanced our presence in a region ideal for robust agricultural activities, bolstering operational performance and contributing to sustainable long-term value creation.
• The Alto da Serra Farm partnership agreement is expected to allow us to diversify our revenue by entering the sugar market, in addition to producing ethanol.
• The Panamby Farm acquisition was important for us to diversify and expand our presence in Mato Grosso, supporting productive area growth and real estate gains through transformation of pasture areas into agriculture.
• We expect that the price of some agricultural inputs necessary for our operations, such as fertilizers and fuel, may increase due to the impact of global conflicts on the global economy and geopolitical instability.
• We continue to monitor U.S. trade policies and their impact on global markets, focusing on strategic risk management and identifying opportunities to expand product competitiveness, ensuring sustainability and stable results even in adverse circumstances.
• Management believes that our provisions for contingencies are sufficient for purposes of covering probable losses that may result from the proceedings to which our Company and our subsidiaries are parties.

Industry Context

The Brazilian agriculture sector continues to attract substantial investment, leading to increased demand and valuations for agricultural properties. Global commodity markets remain highly competitive and sensitive to factors like worldwide supply and demand, weather conditions, and financial speculation. Geopolitical conflicts, such as those in Russia-Ukraine and Israel-Hamas, are exacerbating market pressures and economic volatility, particularly impacting energy and fertilizer prices. Brazil's agricultural production capacity exceeds domestic demand, making exports crucial, but this exposes the company to international trade tensions, tariffs, and foreign government policies. The Brazilian economy itself is influenced by government interventions, political instability, inflation, and fluctuating interest rates, all of which affect the operating environment for agricultural companies.

Comparison to Industry Standards

• Many other producers of agricultural commodities are larger than BrasilAgro and possess more significant financial and other resources, creating intense competition in the market.
• Competitors often benefit from government subsidies in their respective countries, which are generally not available in Brazil, potentially affording them lower production costs or enabling them to operate with tighter margins.
• In land acquisition, BrasilAgro competes with large groups like SLC Participaes and Terra Santa Agro, which have extensive sector knowledge and continuous objectives to expand their agricultural portfolios.
• BrasilAgro's internationalization strategy, including expansion into Bolivia and Paraguay, aims to strengthen its competitive position compared to other market players by increasing consolidated revenues and diversifying operations.

Management Changes

Corporate Governance

Legal Proceedings

• Co-defendant in an environmental lawsuit filed by IBAMA on June 13, 2023, requesting reparation for presumed environmental damages and regularization of 346.3949 hectares, with a claim of R$8.3 million (likelihood of loss: possible).
• Plaintiff in a civil lawsuit filed on September 16, 2024, against IBAMA to declare the nullity of an infraction notice affecting the Serra Grande farm, with a claim of R$2.8 million (likelihood of loss: possible).
• Defendant in a civil claim filed on June 10, 2009, for the annulment of a deed of sale and purchase of agricultural property (Chaparral farm), with a claim of R$6.6 million (likelihood of loss: possible). A settlement agreement for R$50.0 thousand is awaiting court homologation.
• Co-defendant in a lawsuit for damages brought on March 14, 2013, due to a car accident involving a service provider, with a claim of R$2.0 million (likelihood of loss: possible).
• Subsidiary Agropecuaria Acres del Sud S.A. is plaintiff in a lawsuit in Bolivia seeking the invalidation of a Sanitation Final Resolution regarding 4,435.1 hectares of the Guarayos Forest Reserve, with a potential adverse impact of US$13.0 million. The Agro-Environmental Court annulled the resolution on October 20, 2025 (likelihood of loss: possible).
• Subsidiary Agropecuaria Acres del Sud S.A. is plaintiff in a possessory lawsuit in Bolivia seeking reinstatement of possession of the Acres del Sud property from illegal occupiers (likelihood of loss: possible).
• Subject to an administrative inspection proceeding by INCRA, filed on May 10, 2016, investigating compliance with Federal Law No. 5,709/1971 regarding rural property acquisitions (likelihood of loss: possible).
• Co-defendant in a popular civil lawsuit filed on July 29, 2024, arguing BrasilAgro should be considered a foreign company and its acquisitions/leases without prior authorization are null. A trial court ruled in favor of the company in 2025, with the case pending appeal (likelihood of loss: possible).
• Defendant in an administrative tax proceeding filed on January 11, 2021, by the Brazilian Internal Revenue Service for collection of IRRF for 2016, with a claim of R$2.0 million (likelihood of loss: possible).
• Subsidiary Imobiliria Jaborandi Ltda. is defendant in an administrative tax proceeding filed on July 21, 2023, for collection of supplementary IRPJ and CSLL for 2019, with a claim of R$239 million (likelihood of loss: remote).
• Subsidiary Agrifirma Bahia Agropecuria Ltda. is defendant in an administrative tax proceeding filed on August 18, 2023, for collection of supplementary ITR for 2019, with a claim of R$1.3 million (likelihood of loss: remote).
• Subsidiary Agrifirma Agro Ltda. is defendant in an administrative tax proceeding filed on December 18, 2023, for collection of supplementary ITR for 2020, with a claim of R$1.7 million (likelihood of loss: remote).
• Defendant in an administrative tax proceeding filed on May 8, 2024, for collection of Employers Social Security Contribution for various periods in 2020 and 2021, with a claim of R$3.9 million (likelihood of loss: possible).
• Subsidiary Yuchn Agropecuaria S.A is defendant in a labor lawsuit filed on July 19, 2021, for social security contributions. The court ruled in favor of Yuchn Agropecuaria S.A., revoking the claim (likelihood of loss: possible).
• Subsidiary Yatay Agropecuaria S.A is defendant in a labor lawsuit filed on June 10, 2022, for social security contributions, with a claim of Bs.9.429 million (likelihood of loss: possible).

Related Party Transactions

• Cresud, a significant shareholder, has other investments that may create conflicts of interest with BrasilAgro's business activities and rural property acquisitions.
• BrasilAgro made an investment of US$1.0 million in Agrofy in October 2019, in which Cresud held an 18.6% stake. BrasilAgro's ownership interest was diluted in June 2025 after not subscribing to a capital call, reclassifying its shares as subordinated common shares.
• Cresca S.A., a joint venture in which BrasilAgro held a 50% interest, approved its dissolution on July 31, 2025, with a liquidator appointed for winding-up procedures.
• The acquisition of Bolivian companies (Acres del Sud) for R$160.4 million in December 2020 involved Cresud's subsidiaries as sellers, consolidating BrasilAgro as the main vehicle for international expansion.
• Related party transactions include expenses for system implementation, development, and maintenance with Cresud, and a blocked contingency amount with Helmir S.A. related to the Bolivian acquisition.

Stakeholder Impact

• Shareholders: Experienced a significant decrease in net income and lower dividends per share, potentially impacting investment returns. Face risks from foreign ownership restrictions, commodity price volatility, and economic instability.
• Employees: Benefit from profit-sharing arrangements, health and dental care, life insurance, and training programs. The Long-Term Stock-Based Incentive Plan aims to align their interests with company performance and retention.
• Customers: A concentrated customer base (three customers responsible for 52.9% of 2025 revenue) grants them considerable bargaining power, which could affect pricing and terms for BrasilAgro.
• Suppliers: Dependence on third-party contractors and raw material suppliers exposes the company to risks of price increases, supply shortages, and customs clearance delays, potentially impacting operational costs.
• Creditors: Increased total indebtedness to R$885.5 million requires careful management of financial obligations and compliance with debenture covenants.
• Regulatory Bodies: Subject to extensive environmental and tax regulations, with ongoing legal proceedings and administrative inspections, requiring continuous compliance and risk management efforts.
• Local Communities: Operations are subject to environmental laws and social movements advocating land reform, which can impact land use and require community engagement and environmental preservation efforts.

Next Steps

• Continue to invest in developing and transforming agricultural properties in Brazil, Bolivia, and Paraguay.
• Apply for financing with government development banks to support new projects.
• Monitor U.S. trade policies and their impact on global markets to adjust strategies for product competitiveness.
• Establish the IBS Steering Committee by December 31, 2025, as part of the Consumption Tax Reform implementation.
• Implement new accounting standards IFRS 19 and IFRS 18, effective January 1, 2027.
• Implement amendments to IFRS 9 and IFRS 7, effective January 1, 2026.
• Resume the sanitation process for the Acres del Sud farm in Bolivia following the annulment of the previous resolution.
• Continue to explore and operate areas that have been sold until the completion of each delivery phase.
• Hold a public meeting with analysts and other interested parties at least once a year to disclose information on projects and forecasts.
• Publicly disclose and send to the B3 an annual calendar with a schedule of corporate events by the end of January each year.

Key Dates

Recommendation

While BrasilAgro demonstrated revenue growth and strategic expansion through acquisitions and new leases, the significant decline in net income, increased financial expenses, and reduced gains from farm sales are concerning. The company operates in a volatile environment with substantial macroeconomic, geopolitical, and regulatory risks. The long-term strategy of developing agricultural properties and diversifying revenue streams is sound, but current profitability pressures and increased debt warrant a cautious approach. Investors should monitor the company's ability to manage these risks and translate its strategic initiatives into improved financial performance before considering a stronger position.

Keywords

Agribusiness, Agricultural Properties, Farm Sales, Soybean, Sugarcane, Cattle Raising, Commodity Prices, Brazil, SEC Filing, Financial Results, Risk Management, Land Acquisition, Corporate Governance, Environmental Regulation, Capital Expenditures, Debt, Financial Performance, Crop Production, Real Estate