BUSINESS MODEL, COMPETITIVE ADVANTAGES AND DEVELOPMENT POTENTIAL
SLC Agrícola has a deep knowledge of Brazilian agriculture. We are part of the SLC Group, with over 70 years of experience in agribusiness , and with 20 years of partnership with multinational John Deere (in the production of agricultural machinery) in its track record.
Brazil is considered one of the last agricultural frontiers in the world due to its vast territory, abundant rainfall regime, availability of land with agricultural potential and modern production technology.
The Company has opted for a hybrid business model, which can be subdivided into three basic approaches, listed below. We intend to continue expanding the business on these three fronts in order to take advantage of the synergies between them, guided by a culture of continuous improvement of our operation.
This model represents most of the land in operation of the Company. It was the original business model, acquired through decades of land acquisitions in the Cerrado region. Most of the land was acquired in a raw or partially developed state, and over the years, with the improvement of soil and sustainable agricultural production, we added great value to these assets.
Over time, SLC Agrícola saw the opportunity to maximize the use of its installed capacity through lease agreements with neighboring (or close-by) landowners. Leasing contracts have an average period of 7-8 years, and payment is indexed to the price of soybean in BRL (Brazilian real).
The third business approach is currently embodied in the subsidiary SLC LandCo, which was established in 2012 in partnership with the English private equity fund Valiance. This is the “real estate branch” of the company, whose goal it is to be more active in the acquisition, transformation and sale of land.
The Company’s growth strategy is based on three pillars:
such as size, soil quality, location, regional climate, altitude, topography, price per hectare, potential for logistics development and quality of documentation, among other factors, the Company seeks to identify and acquire rural properties in Brazil’s cerrado region with excellent production and appreciation potential;
Leasing areas close or adjacent to our farms, thereby expanding the area under cultivation, will enable us to increase production using existing infrastructure, consequently diluting and reducing our fixed costs and unit production costs, in addition to lower initial investment needs; additionally, the current strategic partnerships with Mitsui and Dois Vales add more potential to increase planted area into this model with less demand of capital (asset light).
Weather conditions and our technological expertise have allowed us to obtain two crops of cotton and corn per season, in turn increasing planted area, reducing unit production costs and leading to technical benefits for crop management. The improvements on seeds and biotechnology has allowed expansion on the intensity of cultivation with yield gain.
Over the past thirty years, SLC Agrícola has developed a business model based on operating efficiency and large-scale production. The Company introduced modern management techniques from the industrial sector into the Brazilian agricultural sector. Following are a few of the competitive advantages that back up SLC Agricola’s leadership position in the global agricultural sector:
We are obsessed with efficiency at all stages of production. We maximize efficiency in several ways. Here are some:
(i) cost structure and efficient operating cycle;
(ii) production technology, with a high degree of mechanization of the planting and harvesting process;
(iii) use of a rotating crop system, which contributes to lower incidence of plagues and diseases, as well as more efficient use of fertilizers and sustainable use of herbicides and pesticides;
(iv) effective use of the no-till planting technique, thus reducing soil, water and nutrient loss to negligible levels, as well as decreasing production costs through reduced machine use;
(v) experience in correcting the soil chemical composition and in selecting seeds;
(vi) skillful use of fertilizers, herbicides and pesticides, which enables greater technical efficiency.
In addition, SLC Agrícola expects that the introduction of genetically modified seeds will increase productivity and reduce production costs, especially with regard to pest control;
SLC Agrícola’s property portfolio is diversified, with its fifteen units under management strategically located within six different states of the Brazilian Cerrado region: Goiás, Mato Grosso, Maranhão, Mato Grosso do Sul, Bahia and Piauí. The geographical diversification of these farms minimizes climatic and disease-incidence risks;
The Company’s business model is based on the standardization of production in its farms, which includes the adoption of facilities, production infrastructure, equipment, operational organization chart, standardized management and agricultural planning that allow the Company to (i) expand and efficiently manage several production units; (ii) reduce operating costs; (iii) control the quality of its products more efficiently; (iv) rapidly implement its growth plan;
SLC Agrícola produces cotton, soybean and corn in a rotation system, which guarantees the appropriate management of crops and maintenance of a rich and fertile soil. This production technique is used in all of the Company’s farms and provides attractive yields and benefits to the production system, such as increased efficiency in pest control and better use of the machinery and labor;
SLC Agrícola was one of the pioneers on the cultivation of crops in the Cerrado region. We have acquired the skills required for evaluating and acquiring farms in the country’s agricultural frontiers, with high production and real estate appreciation potential;
SLC Agrícola’s managers have vast experience and profound knowledge of the agricultural sector and its production processes. The interests of the Company’s employees are aligned with our Big Dream: ““To positively impact future generations, through global leadership in agribusiness and respect to the planet.”