LVRO - Earnings call transcript Q4 2024

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Operator

Greetings, and welcome to Lavoro's Fiscal Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, and a replay will be made available on the company's Investor Relations website @ir.lavoroagro.com. It is now my pleasure to introduce your host, Mr. Tigran Karapetian, Head of Investor Relations. Thank you, Mr. Karapetian.

begin. may You

Tigran Karapetian

and performance. joining earnings Quarter for of helpful XX, quarterly on Fiscal website has that Ruy Lavoro's today's Val ir.lavoragro.com Julian Thank The @ on Neto. Conference us your its Call in the Fourth company Cunha; Officer, Executive Earnings are a June be Financial for XXXX analysis Officer, call Del supplemental you provided Chief today Chief presentation Results may XXXX. On Relations ended Investor

these time cause refer yesterday. filed made risks on net profit or or expressed in discussion could differ from adjusted adjusted with margin, non-IFRS others. These Before remember make EBITDA, of materially the statements and Act based and events reports filed And the EBITDA results statements to the please and statements current expectations position, other from registration the to risks those from company's we forward-looking of differ measures, in call, within this operations involve management's Form loss, Litigation and are strategy to including time for a SEC today's will certain Securities of course begin, financial trends, business regarding among others. with industry on beliefs any and that today. Please forward-looking refer uncertainties the during SEC that implied those detailed results our described actual meaning statements. Please business materially management actual to XX-F that management and statements Reform note, forward-looking may XXXX, call, or Private including could growth, future of the the and adjusted market among

now or presentation is turn in measures for believes investors, as today's that IFRS. I'll it of a useful the this for isolation be the these not to information While Ruy of Cunha, accordance measure presented comparable prepared to provide financial in refer considered for to IFRS. Please accordance a will in CEO. to the most information substitute company release non-IFRS reconciliation information to intended with measures non-IFRS over the

Ruy Cunha

delve Good business. that, for fourth highlights, Tigran. our business results year economic for expectations for financial thank and After the seasonally, you touching traditionally Julian preceded some the context market overall us will last I'll with the we from you, largely into fiscal Thank and line our remarks. Overall, of XXXX. I'll broader today morning, begin return review upon as in landscape and everyone, by lowest Lavoro's quarter our our concluding our update. the joining

million, segment XX% to grains led Agro, side, inputs Brazil million. led revenue XX% Retail once On increase which postpone credit, part which million Crop semester to revenues Union by to specialty to from for improvement. the second by quarter with receivables had to business. Talking Care we declined the revenue margin again a operations, $XX.X us. Nevertheless, to with revenue strong with increasing large overdue XX% saw about by strong quarter fertilizer to contribution a Ag had that a clients our $XX.X strong conservative had us outstanding to our $XXX.X driven our shipments in approach

margins of the as as the our and on, in marking gross first quarter, especially positive for basis business, impact fourth the Our margins in XX.X% improved went in by particularly the input since points year-over-year progression of third gross retail start XX downturn. We've to a we year-over-year quarters. percentage seen sales the in

and gross year-over-year to of year-over-year declining in throughout quarter the environment year, our XXX fourth communicating in finally, second declining basis X,XXX for have basis we the the revenue, first out business, a been of with points points highlighting sense again a worth quarter. This that in declining position from inventory that basis had Given over point, quarter, the it year for in which of consistent excludes stable points higher at this look improved gross inputs percentage better namely agrochemicals, is and in cost impact grants. To XXX our leads points quarter as the particular, improves an our distribution what the profit our that margin prices, first results to the input margins to impact cost given trends XXX seasonality to these increasing makes basis most inventory our cycles XXXX. margins. It's the of in dynamics the fiscal gross our compression

margin we've decline adjusted in gradually the largely slide and the illustrated dynamics attributed resolve. driven we approximately gross compression, by of will which XX% in outlined As EBITDA bridge presentation, in today's expect

talking environment year in the see market input the point contrasting a turning see little the the prices about grain dynamics and the We bit market. to combined Brazil. creating increase technology positive to have crop beneficial 'XX, notable increases now with for ratio in in Recent ag to over we of inputs a for Now year. farmer currently market.Â On is mix yields. side, invest profitability of projected affordability incentives We see in show exchange for a farmers, maximize improvement acres relatively planted additional in created them Brazil, local for last 'XX

that in in part BRL of credit such digits billion digits, in Nino.Â As especially El this extreme mid-single improve droughts the Center We year's as reduction available disbursed a to year-over-year constrained have sequential Mato stabilized amounts crop.Â Moreover, private effects affected and lenders in of was market many from of farmers distribution lower-than-expected farmers believe down additional for regions expect last midsized approximately while bean positive corn observed reflects a give margins. acreage harvests.Â To lingering banks left soy led in X in end for cash the by difficult XX% Grosso today other the at the farmers quarter. This recent deterioration largely favorable last reduction months, is drought repayment and credit yields recent more previously below to noted, recent programs, in context, basis we our We region decisions. and in lower-than-expected planted to with government to farmers we system. the the the the liquidity significantly September soy cash a understandably in most of mentioned, line, trend after to which, are their in small farmers make some those XX-year affected many has following single resulting on in the profile. In developments Contrasting This regions. harvest West made impact access as call, prices last yields fell most Brazil's credit for year's how recent to grow flow input for at to months, drought, low projected as discussed dynamic to look banks history this

of the An averaged system those inputs to savings their persistent is upcoming one high while In the that all With than demand repayment addition, end, will year, believe and X.X emphasize in environment, their margins And a XXXX, at above outlook market fixed billion.Â Â In BRL range that that growth to inputs solvency. XX% market XX% U.S. range billion to projections acres has last farmers BRL far declines. With choosing their with for to rather XX% between well of $X.X anticipated planted of $X.X fiscal will by network this billion well is levels. in maintaining issues to billion, is priority support we over proximity the for liquidity this this Brazilian this the issue have EBITDA, I to projected want the optimize of now fiscal between we terms own Safrinha many credit XXXX, recent cash $X.XX rates. to liquidity generating and the valuable that driven X.X seasons. Brazil $X.XX is and the consolidated operating only asset vast service wait expand to input On revenue rebounds.Â To billion end capture with the positioned X.X fiscal EBITDA in a approximately widened market to said, by margins farmers to operating year to growth cost billion improve market growth. said, from contract expect also ag resolve slightly main held gap our for estimated our the that and of generated with we these margin that as year XXXX challenging year than land, year are put, past the offset to billion farmers exceeds and of delays, back better fiscal we by months.Â Looking to plan that XXXX. Simply retail more and inputs volume for price BRL effect the majority have This market revenue in revenues billion improvement. period, cases consolidated retail BRL base be adjusted on to X.X appreciating between and in to closed sell and and range profitable decade.Â Consequently, grow we expect relatively XX% for conditions adjusted relative is crop by to that commercializing of of dollar grains.Â With anticipated basis, themselves farmer for consolidating for the year's the when farmer efficiency our our available modest grow stores corn, all revenue to

to constraints visibility. in and With I'll the the reflects reduction farmer pass guidance over deeper results. Our that, market Julian for a recent liquidity now impact at look financial of the overall resulting

Julian Del Val Neto

Thanks, you Ruy. evening, morning, afternoon, Good are. wherever

let little a that. year the bit and full me about results, talk with Let's start

points as deflation year This full in barter largely grains a the the billion. at came million to challenges.Â The X%, input market consolidated XX% for Despite fiscal balance XX% year gross favorable a $XX.X revenue for deflation, mainly less a decline XX.X%. EBITDA in was Our gains X% to product XXXX at share in margin $X.XX year-over-year. adjusted revenue due down $XXX.X was $XXX.X in basis reaching helped XXXX and million by year, input XX% input revenue driven XXX headwinds increased price and to compressed price mix. The came from by positive profit increase operations, those the by which particularly grew gross was million. This our our

a of cash million lower saw gross corresponding costs XX.X net before. Alongside benefit smaller to positive, the Net from XX.X corresponding positive, finance XXX.X a profit, million As from million year. BRL tax. adjusted previous flows up $XX.X profit of a due BRL inventories. Net was operations totaled we in loss the BRL in and XXX.X million margin to $XXX.X previous credit provision to an for compared increase $XXX.X $XX.X a compression million expiring Ruy an loss million for the mentioned, in expected net million this $X.X net year. losses Adjusted was was gross primarily to compared to headwind million loss from million income higher to $XX in BRL year a allowance from and extra million

Now, inputs rise primarily Ag Care, BRL by the This X% input to decline to Retail million revenue XX basis a in payments, by Reals by margin our with an by million, U.S. basis while revenue of gross decision grew fourth the previously and to shipments starting $XX.X mix and the from talking net a Brazil $XX $XX.X gross reaching to a year-over-year product X% our grains Ag of basis XXX overdue results, fiscal of dollars. Consolidated adjusted in gross strategic million loss points higher revenue XX.X%. results million. results. In was reflects point XXX.X consolidated with year-over-year, unfavorable our year, similar improved increased driven in in by loss with lower supported points margin impacting $XXX.X of to by Adjusted income $XX.X Brazilian by results million the to Crop million million. the loss by of decreased Retail $XX.X inputs a million revenue compression by due with certain net million XX% the mentioned Gross XX% million, quarter by total million, down million XX.X% costs about $XX driven contracted margin compared with higher clients as conversion $XXX.X inputs an expansion, tax by to quarter, mix to revenue Brazil margin to for revenue increase to while affected of factors delay finance $XX.X impacting $XX.X slightly of and increase prior profit to was declined sales X% XX.X%.Â Net of grains XXX to however, XX% $XX.X fourth to profit, X%

by $XX.X XX% $XX.X In to results to the to X% by increased surged basis XX.X%. revenue revenue Colombian from Ag. Retail Ag by Latam profit points due For favorable and to Pattern Union effects led Crop Care, margin mainly million by gross expanded Pesos. Gross strong rose XX% million, Agro $XX.X and XX by from currency to million,

in to XX% XX.X%, reflecting $X.X to negative, effects declined $X.X period, gross largely income. Last we was the profit to and year payables with lower debt net at has X.Xx. to but as payable, subsidiary ratio, operating down we landed profit not Adjusted margins other contribution compression million including consolidated mix If of acquisition a the gross decline at of those due Per EBITDA adjusted our $X.X million least, increased. by However, landed exclude from EBITDA prior in product X.Xx.

Brazil distribution to landed pass X.Xx the at for Ruy is the Our below it remarks. limit. With ratio, back adjusted CRA that to all net EBITDA said, some of debt which X.Xx our covenant I'll concluding

Ruy Cunha

Thank Julian. you,

our to that will for does as impacted the our main in together so we not a one the farming the improving. Brazil Lavoro that fundamentals, we market the in have expect last come in gradual has see fact input the were our the midterm. of next partners dealt some to sharp actual from potential strengths. environment. With a role upcoming that, be to we're agribusiness which play and overcoming work an food in they variation the this commitment be going And in such pass results clients and region and both context, shown in that with team, also and of and go X,XXX factors the improvement where and negatively nowadays, to you, on of optimistic of thank of and have will production. Believing I that, the and summary summarize is that decline farmers are to but is employees stands now I'd change of our feeling and Q&A. this is the perspective for have can encouraging market I over better the of this increasingly prominent a year last will the thank energy on to short-term profitability, have of Cycles provide strategic year. If like think in country over prices with, also year, its focused recognize our to short-term market dynamic year. Â It's I'll bit for little company incredible the very as this the visibility the challenges.Â In challenges we the this with

Operator

Oppenheimer. the of [Operator line Instructions]Â The first question comes from with Kristen Owen

Kristen Owen

We are November sitting X. here on

books your first for XXXX. quarter fiscal So, the in already

first how Just half for your you help trends wondering should us if be think the order about about and can cadence of guidance versus second the that we the fiscal thinking half there? year,

Ruy Cunha

Hi, can Kristen, highlights some start just then Julian wants and giving complement. maybe Yes. I to

Julian Del Val Neto

half versus be last I first don't think similar don't yes, breakdown. might expect going of we broadly quarterly today, and to we to and as it say, the There year. second here Kristen, be materially in I seasonality, half I Hi, the sit but different from would be terms some takes, puts think it's

Ruy Cunha

is On in with performing pace the the we let's of the saw line pace is performing, farmers. very negotiations, that, last of the Yes. say, year, much Kristen, the the market behavior what of market

lot not dynamics anticipate So, this in we changing year. a do of

Kristen Owen

any whether can that if double-click where are? Maybe And are pricing of basis. with opportunities large is that stabilize year. the the on where you of the pricing given year-over-year You we sort your bankruptcy Maybe starting sort associated in channel last impact the inventories today, just one provide the region? had in on can noted on inventories channel terms in that a competitors of of to of risks commentary or

Ruy Cunha

Yes.

here. So, important on X components input inventory and the prices,

we've the being the also of gate margin And is farm seen months. stabilization, is prices, in recovery. the the the in is line of mentioned, this prices input I last on As what indication which an reflected particularly trend important

So, stabilization scenario is apparently clearer. now becoming

in we regions think is there a I though market on the better is official do normalized. question, we sentiment position price. of regarding retail that even beginning more is we the Right thing, Brazil.Â Now, But overall in retail second second that here have would in that this inventory, now, which The year, very see dynamic. competitive no in the nowadays inventory data to say have mostly your I continue the the inventory

some our there's area in expansion. coming to They their But get the mentioned, continue inputs. They're are nervousness the I investing they stores to buy As in system. that inputs farmers to basic need.

opportunity remains So, in I understand moving to for an us strong, might though be think there's what need that we the term, this is demand even noise short forward. the some and

Kristen Owen

One last over. one turn I for me before it

little the savings on mentioned footprint. side, You restructuring around of bit OpEx maybe a physical cost the

year, the understand waterfall. cost EBITDA those that us help to next waterfall you contributing about for how savings Just think

Ruy Cunha

Yes.

I much actually last margins come of what most very of to the from in because impact we recover terms was the think expect high. EBITDA year that inÂ margins will

we Now, And see with opportunities specific in in our do low-performing we positive major some will with won't but openings. combined also by that stores on see to anticipate said, acquisitions overlaps further grew opportunities being a for restructuring, organic store that a eliminate but we SG&A, impact regions. I both our consolidation and some profitability. have do

So, most comes anticipate But the also we we'll say, upcoming as, the are lever. provide let's what details counting can optimization on more from months. margin, is next footprint a recovery that but second of on I

Operator

Theurer question Next with comes the Ben from Barclays. line of

Benjamin Theurer

stressed Just you follow-up in farmer seeing reflect we as behavior do you're kind farmers? like still seen of some down because outlook how your guidance. market, the the prices expectation an As conditions. Have to about relates of and there's a the you quick changed And lately? of it, it of has come to you of as think think in improvement any somewhat obviously, stretched, profitability, drought what the and of that

to you comment farmers Any products, would that behavioral you, any process the through? does the that them have much part change way of buy So, as to go appreciated. be how

Ruy Cunha

comments. year, they right delayed a grains from buying are in few and last farmers now selling, their were So, Safrinha. Like in decisions, instance, the taking delayed for

We their so, inputs of availability. also the or saw, this concern would a and particularly, growing last month secure say, over farmers to I

worried the Brazil are the Given to specific and getting also the the overall some imports inputs, margin products not scenario for lower now have farmers reduced and of product. some about

I to in would the the the growing and or that, on last is year years. lower demands moving the line So, saw stores. But the say month overall, last say, concern a market the is visits slowly I with so and much that in accelerating we previous and would than

I Now, then, when X to a of it profitability comes think things. it's combination

So, the that corn is are that not package even buy corn, how obviously has a have though and farmers do not prices calculation much. basic in that say, the is I soy of inputs. bags better grain use But at so to to I'll that the position, many sense, of my peak, think to

estimations, quantity had bags. of now is, protection.Â This our the seeds, they to So, bags fertilizers, XX again, on and a And of grain number buy also basic around this for down the basic to come use crop for a Safrinha of but package in instance, into prices. has to year, something last of bags the corn XX input prices, combination

their more to be I the positive. is using relationship think farmers take So, will getting And decisions. this

Benjamin Theurer

and suppliers Has of maybe thoughts not some how as yours to change unaffected? of they the competitor about a And Is that credit in case? bankruptcy. Or get large amongst that then your how your is relationship is think wanted you? suppliers. Obviously, I sort the the yours that with file had behavior lines towards triggered and sentiment to of the just some amongst of your suppliers to

Ruy Cunha

was after without in concerns is look on picture when player. profitability year, that a particular always last comes obviously, was end to we to credit we had their having impact think applied specific into to I the the look of that, the farmers big that need What concession. And see ourselves. there it some at already even

credit. let's suppliers. and for And that So, holds also we true banks in were conservative providing more, say,

already So, what approach was started. is season place the in I when can that conservative say the

will to and I let's then provide be it feel profitability, flow basically we through improve start improve system again, as continues buying farmers to money the lenders think say, more, continue it to And will confident there. credit will again.

I started, time, say, season. on, it's on would early of it has a I but matter think the

Operator

the Next line question with comes Austin Moeller Canaccord. of from

Austin Moeller

question first I have Just the here.

think has within Nino NOA So, data the data La timing and on discuss normalized past rainfall be the activity and you've show El coming in of Argentina to with month. on based even historically elevated seen NiÃ±a? continued the planting Can you may we've this that collected Colombia drought what the seasons Brazil, you and when

Ruy Cunha

Yes.

now, of a in is mind. The evolution I can easily last about So, XX%. about my that the planting was around Brazil, total number planting talk is area. This XX% soy soy I right Brazil have which in number year the

we say, slightly would see delayed more you of the And I had, years would towards year. last be an we previous I compared average should So, is if say, to XX%.

it's now. but So, delayed, rains, progressing with it's faster is XX% recent

Austin Moeller

M&A are of how cadence you this strategy about thinking and with environment? that And in your retailers the

Ruy Cunha

Yes.

more to growing continues organic saw M&A growth comes interesting the see more we and year participation. opportunities what be on We it nowadays, environment we the when focus similar in in opportunities. the last to side market though even continue is to we targets, that organic which M&A to believe think will to the what and I gain

year. be will team main the this focus our that So, of

Operator

gentlemen, Ruy now like comments. have Instructions] we question-and-answer reached for [Operator would Ladies the to I Cunha the over session. closing turn end and to of floor

Ruy Cunha

you Take to review. participation thank forward See want care. next for just quarter all I you. to looking the and soon. our Thank you

Operator

Thank today's concludes This teleconference. you.

You may for Thank participation. your lines your you this time. disconnect at

Lavoro Limited (LVRO) 1 Nov 242024 Q4 Earnings call transcript