Executive Summary / Key Takeaways

• Cresud (NASDAQ:CRESY) stands as a unique investment opportunity, leveraging a diversified portfolio spanning large-scale agricultural operations, strategic farmland development and sales, and a significant stake in urban real estate through IRSA (IRS). This multi-faceted approach provides resilience against regional volatility and positions the company for long-term value creation.
• Fiscal Year 2025 demonstrated a strong financial rebound, with net income rising to ARS 224,366 million and consolidated operating income turning around from a significant loss to a ARS 220,945 million gain, driven by robust agribusiness performance and strategic real estate sales.
• The company's innovative agricultural services (FyO) and e-commerce marketplace (Agrofy) represent crucial technological differentiators, enhancing operational efficiency, market reach, and providing additional revenue streams, with FyO expanding into Brazil and Agrofy focusing on breakeven amidst market shifts.
• Strategic land monetization, particularly in Brazil, and the long-awaited Costa Urbana urban development project through IRSA, are key growth drivers, expected to unlock substantial value and contribute significantly to future profitability.
• Despite macroeconomic challenges in Argentina, including climate impacts and inflation, Cresud's diversified geographical footprint, proactive debt management, and anticipated favorable government policies post-FY2025 are poised to improve profitability prospects and enhance the value of its extensive land bank.

A South American Colossus: Cresud's Integrated Strategy

Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria, founded in Buenos Aires, Argentina, in 1936, has evolved into a diversified powerhouse across Latin America. Its core strategy revolves around a unique integration of large-scale agricultural production, strategic farmland acquisition, development, and sale, complemented by a substantial investment in urban properties and financial assets through its controlling stake in IRSA. This multi-pronged approach allows Cresud to capitalize on diverse economic cycles and regional opportunities, positioning it as a resilient player in a dynamic market.

The company's operational footprint spans Argentina, Brazil, Bolivia, and Paraguay, cultivating a broad range of commodities including soybeans, corn, wheat, sugarcane, and oilseeds, alongside extensive cattle breeding and fattening operations. This geographical and crop diversification is a foundational strength, mitigating the impact of localized climate events or market fluctuations. Beyond direct farming, Cresud strategically leases its farms to third parties, a tactic that not only generates revenue but also serves to cultivate potential clients for future land sales, demonstrating an integrated approach to land monetization.

Competitive Landscape and Strategic Positioning

Cresud operates within a competitive environment characterized by both large-scale agricultural players and specialized real estate developers. In the agricultural sector, rivals like Adecoagro (AGRO), BrasilAgro (LND), Bunge Limited (BG), and Archer-Daniels-Midland Company (ADM) present varied competitive pressures. Cresud's diversified business model, encompassing both agricultural and urban properties, offers a broader revenue base and potentially greater strategic adaptability compared to Adecoagro's more agriculture-centric approach or BrasilAgro's heavier reliance on farmland sales. While global giants like Bunge and ADM possess immense scale and global supply chain advantages, Cresud's regional expertise in Latin America allows for superior operational efficiency in local markets and more tailored regional strategies for crop sales and agricultural services.

In the urban property segment, Cresud's controlling interest in IRSA places it directly against other real estate developers and investors in Argentina. Here, Cresud's agricultural integration provides a unique value proposition, offering diversified revenue streams that can provide greater resilience than a pure real estate focus. This strategic blend allows Cresud to leverage synergies, such as urban-adjacent farming, which differentiates its offerings and strengthens its competitive standing.

Technological Edge: FyO and Agrofy

A critical differentiator for Cresud lies in its technological ventures, FyO and Agrofy, which enhance its operational efficiency and market reach. FyO, an agricultural services broker launched approximately two decades ago, has grown to become the largest broker in Argentina. It offers comprehensive services including input and output brokerage, consultancy, and futures and options. This digital-first approach, supported by 75 technology employees out of 300, provides a significant competitive advantage in streamlining agricultural transactions and providing valuable market intelligence to farmers. FyO's expansion into Brazil, with a new CEO leading the charge, signals a clear intent to replicate its success and capture a larger regional market share, potentially requiring future capital raising to support its growth.

Agrofy, Cresud's e-commerce marketplace for agriculture in South America, further solidifies its technological moat. Positioned as a leading marketplace in the Americas, Agrofy focuses on improving platform transactionality and offering fintech solutions. While its revenues have been stable due to the drought in Argentina, the company is strategically focused on achieving breakeven by optimizing operations and managing employee numbers. This platform not only facilitates transactions but also provides valuable data and insights, enhancing Cresud's understanding of market dynamics and farmer needs. These technological arms contribute significantly to Cresud's competitive moat, driving operational efficiency, expanding market reach, and providing additional, high-margin revenue streams that complement its traditional agribusiness.

Financial Performance and Operational Momentum

Cresud's financial performance in fiscal year 2025, ending June 30, 2025, showcased a remarkable turnaround and robust growth. Net income surged to ARS 224,366 million, a substantial increase from ARS 163,826 million in 2024. Consolidated Operating Income reached ARS 220,945 million, a dramatic shift from a loss of ARS 172,748 million in the prior fiscal year. The Agribusiness segment alone contributed ARS 49,166 million to operating income in FY 2025. This strong performance was achieved despite challenging conditions, including stable but historically low commodity prices, high input costs, and irregular weather patterns.

Operational details underscore the company's strategic execution. In FY 2025, Cresud cultivated approximately 300,000 hectares, yielding 830,000 tons of crops. Livestock operations also contributed positively, with increased beef production, firm cattle prices, and lower feeding costs driving strong margins. Real estate sales were a significant driver of results, including the sale of a 3,630-hectare parcel in Los Pozos, Argentina, and BrasilAgro's sale of the 17,799-hectare Preferencia farm in Brazil, both generating "very strong results."

The urban property segment, primarily through IRSA, has also demonstrated impressive recovery. IRSA's rental segment EBITDA reached $162 million over the last 12 months (Q3 2023), surpassing pre-pandemic levels. Shopping malls achieved 97% occupancy, up from 89% post-pandemic, and AAA office buildings boasted 100% occupancy. IRSA's successful deleveraging, including the cancellation of debt and issuance of new zero-interest dollar-linked notes, further strengthens Cresud's consolidated financial position. The company's credit rating was also upgraded by Fix from AA to AA+, reflecting improved financial health.

Strategic Outlook and Growth Catalysts

Cresud's outlook is underpinned by several strategic initiatives and anticipated market tailwinds. The Argentine government's recent foreign exchange liberalization and permanent reduction of export taxes on major grains and beef are expected to "strengthen the sector and improve profitability prospects for the next campaign." This policy shift could significantly enhance the value of Cresud's extensive land bank in Argentina, which has historically traded at a discount compared to other regions. Management anticipates that a more favorable government stance could lead to substantial appreciation in Argentine land prices.

Farmland sales, particularly in Brazil and Paraguay, are expected to remain a "very relevant" source of strong results, with a large transaction by BrasilAgro anticipated to be recognized in the fourth quarter of fiscal year 2023. Cresud's strategy of buying land in bulk, developing it, and then selling smaller, financed portions continues to yield high internal rates of return, as evidenced by a 28% IRR on a Paraguay farm sale. The long-term Costa Urbana development project through IRSA, approved after two decades, is projected to drive IRSA's growth for the next 10 years, unlocking significant value from nearly 900,000 square meters of residential and commercial development.

Operationally, Cresud expects its overall agricultural results, combining real estate, operational farming, and services, to be "close to budget" despite challenging conditions. The anticipated shift to a Niño weather pattern is crucial for normalizing rains in Argentina, which would significantly benefit future wheat and summer crop yields. FyO's expansion into Brazil and Agrofy's focus on achieving breakeven are expected to contribute to future EBITDA growth, further diversifying revenue streams.

Risks and Challenges

Despite the compelling growth narrative, Cresud faces several risks. Macroeconomic instability in Argentina, including high inflation and currency devaluation, continues to pose challenges, impacting the real value of assets and financial results. While management has shown adeptness at navigating these conditions, as seen in the tax credit reversal due to a Supreme Court decision, the inherent volatility remains. Adverse climate conditions, particularly droughts in Argentina, can significantly affect crop yields and operational margins, although Cresud's geographical diversification helps mitigate some of this impact. Commodity price fluctuations also present a risk, as sustained low prices or high input costs can compress profitability.

Regulatory risks, such as Central Bank restrictions on dollar access for debt payments, have historically required proactive refinancing efforts, though management has successfully managed these challenges. Furthermore, legal claims, such as the ILS 140 million claim against IRSA's investment in Israel, can lead to provisions and impact net income. The long development timeline for projects like Costa Urbana also introduces execution risks and sensitivity to future economic conditions.

Conclusion

Cresud's investment thesis is compelling, rooted in its unique blend of diversified agribusiness, strategic land management, and significant urban real estate holdings. The company's ability to generate strong financial results in fiscal year 2025, despite a challenging macroeconomic and climate backdrop, underscores the resilience of its integrated strategy. With innovative technological platforms like FyO and Agrofy enhancing efficiency and market reach, and major urban development projects through IRSA poised to unlock substantial value, Cresud is strategically positioned for sustained growth. While macroeconomic volatility in Argentina and climate risks remain pertinent, proactive management, a diversified asset base, and anticipated favorable policy shifts offer a robust outlook. Investors seeking exposure to a well-managed, diversified Latin American conglomerate with significant upside potential in both agricultural and urban assets should consider Cresud's long-term value proposition.