LVRO - Earnings call transcript Q1 2025

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Operator

Welcome to the Lavoro's Fiscal 2025 First Quarter Earnings Conference Call. [Operator Instructions] Please note this conference call is being recorded, and a replay will be made available on the company's Investor Relations website at ir.lavoroagro.com. I will now turn the conference over to Tigran Karapetian, Head of Investor Relations. Thank you.

You may now begin.

Tigran Karapetian

Thank you for joining us today on Lavoro's Fiscal 2025 First Quarter Earnings Conference Call for results ended on September 30, 2024. website Chief Garrido. The Ruy supplemental analysis company on Investor our Financial and earnings of call, may its Julian that Officer, has Relations the today's quarterly Executive in Cunha; Officer, Chief presentation be performance. On helpful ir.lavoroagro.com your at provided a

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

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

Ruy Cunha

review a today quarter results. you and of for XXXX joining Thank as Good thank everyone, morning, Tigran. Lavoro's you, us First

profit Progress Brazil seen initiatives integration outlined quarters double-digit XXXX aimed strategic our our continuing to Care benefits. Latam segments. to and earnings vertical trends operating revenue, year's year-over-year operations Crop growing with of first prior in last gross delivering between price enhancing and in EBITDA. of the and gross continued retail profit in last at improved mirror than gross as points growth Retail today's across the residual quarter in gross resilience, margin achieved and strength Care profit, price As release, X% growth demonstrate This our made deflation year-over-year of impact impact results quarter are conditions year's its consecutive reported largely by Ag and offset of tightening with the revenue of farmers by market of adjusted in carryover season. Brazil yield second revenue Retail expansion. effect dry our is credit input the more decline easing with by policy basis and the declines. Ag the growth pressures the input XXX supported in Crop

the since evolving the which first landscape, discuss has changes of considerable end let's Now market our seen quarter.

described for expectations earnings 'XX-'XX one On profitability year for notable If improvement recall contrasting farmer by the call, the in stabilizing our shaped inputs dynamics. we alongside last being as hand, prices. Ag input you in market Brazilian crop

near-term growing the and have impacting weather outlook year this soybean liquidity farmer profitability today, forward worsening conditions farmer other for the and Brazil. has credit improved to demand behavior. Fast and hand, yield the expectations season across purchasing improved during tighter further. On availability adversely next Favorable for

have spared risen agrochemical remained at bag corn XXXX. farm BRL first local the XX Meanwhile, for encouraging, prices In above season addition, cash rainfall early time appear have projections the gate Safrinha as for since stable of particularly issue significantly excess months for contrast the the the the the in second sector these has of in developments, last channel suggesting been year. constraints agribusiness largely to calendar escalated liquidity resolved. In inventories consecutive X positive quarter, that prices

As of retail the extending Retailers increasing a medium-sized liquidity to purchases, line, in across input resulted start in a and Lavoro's for suppliers which Similarly, on factor percentage input restrictions ordinarily critical purchases this small- to a input expecting orders. season the credit requirements. at account to this role cash-based repayments capital financing making similar reminder, this provide sector. at farmers XX% fundamental year, first in working fell significant low half financing in of single plays value XX% with Brazil's decline repayments digits, have credit farmers a crop harvest. retailers time purchase liquidity for expected of a chain. Farmers' to

Julian December, early normalize. I'll look for inventory of proceedings sudden in November Brazil cash-based with for reorganization pass the product the finance, successful it deeper financing farmers judicial categories led have the Lavoro of conditions purchase a January, our addition, inventory and among in triggered major key financial the renegotiations a in tightening window purchase to supplier shortages institutions, significant now ag new and decline order at aversion a shift activity key yet with financial industry helped inventory suppliers peers. This to which a led results. first suppliers retailer severe in for and over bottlenecks, retail ease abrupt Brazil soybean retail critical these In replenishment during to coupled partially orders for operations fully risk tightening inventory from to though in and crop. In a

Julian Del Val Neto

expenses, effects headwinds offset Thanks, Lavoro's primarily to Crop the a dollar totaled revenue in by Brazilian as Perterra. In year-over-year as Brazil Ruy. loss XX.X price led terms, for to X% created compared in net expenses year-over-year, compared the Agro BRL profit assets costs partially to a which Care, XX% revenue million dollar personnel offset compared BRL Besides In XX.X compared billion, decline to lingering saw BRL decrease impacted BRL U.S. X.X by by loss the in deflationary XXX.X was consolidated revenue of finance increase Union Ag growth XXXX, and which real financial quarter declined BRL This input a prior million suspended Retail, higher was with due that, $X.X XX% last the BRL XXXX. exchange U.S. BRL provisions tax of had per in XX% of net million million, higher first higher were BRL the EBITDA XXX.X strong basis this assets, to expanding reported mainly net the XX.X%, year driven XX% XXX.X of XX% by declined a profit and EBITDA million first improved gross consolidated and revenue, a depreciation SG&A to year decline. an by by other loss of driven in Retail. representing was currency XXXX, In In XX% those to growth. and of prior year the first million driven U.S. but BRL This X% drivers. Adjusted dollar quarter million million similar loss adjusted XX.X year-over-year. million, the foreign Ag of million declined was Brazil terms, in impact to period. inventory increased in higher year distribution quarter reflecting quarter Adjusted XX a net U.S. terms, adjusted with XXX.X deferred million million margin XXXX, XX.X gross In effect. Lavoro to results. quarter interest loss BRL terms, net tax as key accounted increase prior points loss costs profit period. year, BRL XX.X dollar primarily expenses. XXX margins first lower we mainly current gross year-over-year, of increase to due we gross BRL translation compared Despite XXX.X creation was the

to now Turning segment our results.

distribution sales XX% to last Brazil Ag year's profit and BRL X.XX and Retail [ headwinds specialty and products Ag prices volume Adjusted Input in XX.X% declined supported in in to higher inventories in volumes protection were led credit of partially revenue and than crop on a ]. Gross by a price impacted expired costs, with by cost farmer personnel stronger stabilized declined basis. fell Let's liquidity with basis protection input year-over-year grew BRL to offset on crop loss. margin XXX and expanding EBITDA by BRL offset better XXX by sales by X% points billion, Revenue provisions start and X% as million, million margins, more lower the for seed XX.X input positioning sequential declines to XX% price/mix expected inventory constraints. combination declines specialties Brazil allowance retail. driven higher

year-over-year credit in BRL Ag the Latam let's Latam X% higher from offset in increased benefiting declined points our XX.X but BRL to relative basis more million Retail appreciation not to with Real. million costs Ag margin Care X% Gross XX.X%. profit. Last of the and expanding BRL the Now XX% XX.X as profit XXX Brazilian EBITDA to segment. Adjusted Crop than to personnel grew the XX% increase Colombian million, Retail. Peso gross least, about to Revenue talk XX provisions

partially external segment significant revenue, expanded in higher strong in BRL gross improved driven product Brazil XX% revenues Retail. increased supported XX% execution Crop by offset EBITDA Ag and XX.X%, by posting XX.X with product So year-over-year XX% personnel Perterra gross portfolio basis category XX% and grew growth. to S&OP increased coordination our XXX.X operational margin saw Adjusted registrations a increase from points Gross around to with mix. declined to BRL also million, sales while in Care efficiency, reflecting profit BRL profit Union million changes Agro X,XXX to commercial expansion, million, costs. and by benefiting increased XX.X

to over year fiscal turning our XXXX. Now outlook for

a align our the fiscal current expected dollar X.X consolidated exchange we billion, consolidated residual mentioned, revenue net $X.XX assumed X.X net are better net between widespread billion an and based As while dollar Consequently, X.X U.S. Lavoro's billion. and between BRL year environment. We input BRL with outlook billion, on billion BRL material between of XXXX X.X $X.XX full throughout billion. and X.X, average commercial net expect Ruy constraints billion In on in revenue with revenue had updating second we $X.XX the the to year. U.S. business impact BRL and quarter inputs supply rate operation expect Brazil billion $X.XX the terms, now between effects revenue

longer in I'll pass XXXX. With we back XXXX Ruy said, some to year all remarks. concluding adjusted expect grow no Finally, that EBITDA full full compared to for to year

Ruy Cunha

you, Julian. Thank

Brazil enhanced in in are improvement we crop prospects of in Looking the in sentiment for ahead, profitability by light season. farmer the the 'XX-'XX encouraged

ease We have liquidity value should positive the a will potential the constraints, from chain. rest of the on soybean expect cash effect upcoming farmers' the harvest which proceeds help

on focused well-positioned executing As end and to implementing outlined now ensure we inventory network Lavoro as earnings recovery gain to strategic factors initiatives to retail our the of measures capitalize continued near-term we disruptions, in is market within navigate cost committed savings reductions last in momentum. The remain early call financing motion. through our are to control optimization these fixed and signs cost

estimate this As close our part Lavoro's to freight RTV are revenue closures store all consolidated. reach stores of efficiency. the effort, proximity identified market else nearby will will capital these be and more and approximately We costs Brazil retail by on locations and X enhancing eliminating these revenue to will reduce in we also be within reassigned impact XX%, minimizing fixed affected Retail potential lower profitable Ag will administrative locations stores, input from expenses that initiatives have while working footprint potential. Brazil by duplicative equal. Overall,

cost-saving measures Q&A. the thank in of over year. With second of and the pass I'll materialize these that, half expect benefits you, fiscal for the We to

Operator

Owen from is with question first line the our Kristen Oppenheimer. And of Instructions] [Operator

Kristen Owen

I just anticipating wanted a the that guess guidance, fiscal XXXX. little the year. with updated I to the comment growth surprised for I'm you're longer by bit EBITDA in first guidance start no the

be it a from of back of expecting your room some for in should your some fiscal QX. and on sounds understanding in headwinds like may of year. sentiment But the be the end improvement market, comments there So that severe the perspective some half we

XQ maybe the in that start guidance? difference color be helpful the on you rest can would maybe us impact? the mean about the provide additional it XQ as you magnitude the year? should any can Just So of be the being versus I thinking understand of if to help we

Ruy Cunha

Thanks question. is your for Ruy. this Kristen,

the -- we think is timing the really got the inputs. I that main effect on we

the conditions, As had all improving sentiment year-over-year. of improving, we we also we margins good given mentioned, a actually very farmers saw so and quarter, first the

good we specific the second half. getting detail quarter. result. I today, of in with what that impact second our is a But supply us have a second of the expect to much if the do Now the crop delays for in have we inventories the the provide are can terms impacted We with won't more -- for soy things have on on say semester normalized deliveries

to today, But this is point confirmed. yet be

that know in of the deliveries replacing We for mix. an that our is on of effect had best products the we orders for in sure did crop soy products the had affected. that but our with we what were So terms the inventory,

So products we at we time. couldn't supply all needed the that

Kristen Owen

sentiment, Okay. how put more a just into have willingness unpack help That's OEM to to just in versus side helpful. on improved piece, product that the to and the the But sentiment you is follow-up. of starting One cash now then on that maybe I'm the I more do farmer much related conversion get we're can sorry, in the January, harvest season? channel debottlenecking us

Ruy Cunha

got sentiment on question? mean if you Or not sure I farmer the market? Sorry, the the I'm

Kristen Owen

and comfortable more the is of sending product A the cash of Brazil conversion sentiment A are then with what more to getting If farmer bit bit both. their cycle. the and both. OEMs

to that. to of ability your some So on actually collect start

Ruy Cunha

Well, So crop all -- soy starts see right that with in right? mentioned already should past, year. a We for prospects million the that income very XXX as income, strong surpass so conditions the improving I tons. saw see. their this we for think we the farming the I farming

in expansion corn some expect also area. the We

year. it's help dollar to the their And to most So that crop with likely appreciation be at going should positive other also some farmers strong interesting see a effects prices. crops we sell

to input that the mood improvement their this normalized been think it's meet they it So and inventory effect time. were in a retail important affected and When the by we channels previous this by to year. do ability in for in excess And also commitments. Consequently, also comes remember input to sentiment an I manufacturers, the has, by reflect see in manufacturers. large, this farmer better should their also

for a it's farmers. also for mood, better manufacturers both overall, and So input

need follow to a next on We Now up little to obviously, timing is the be the going month. bit challenging.

the is So positive trend in both sides.

Kristen Owen

I'll notice of and My quarter. then turn it business did the Okay. over. I this question, last off-patent the strength

your articulate you maybe roll can of from in own of channel Just the how patents the to of coming as pipeline off? of these starting integration registration are is some that big much versus you're seeing internal terms what

Ruy Cunha

Yes.

both. it's actually, So

been years one terms X a in for So already companies in most the has in row, of product of registrations prolific Brazil. Perterra

and products, also and we that pipeline herbicides, So strong now have includes a very of fungicides. insecticides

our integration have And is with we key channel as also, one think that So strategy. component. I the retail also accelerated of part the

I having of grow. say it's combination what business I has initiated But potential we both. than see more And would as do Perterra We only see a to think much its this path today.

So part very the a business be looking at as one. we of should this exciting

Operator

the questions next Theurer Ben are Barclays. Our of from with line

Benjamin Theurer

means really that wanted that up of you because efforts? also you next How what into as starts to fiscal all footprint? And anyway once just rationalization couple to your as the that is really following how just much of quarter, count maybe I in for in store you're guidance dynamics bit the I decision the rationalize on a but to move this into third this related the doing initiatives we of that just about Just potentially a competitive the the you're guys these your that about wanted understand market, to then topics, which think year, and reducing of should is and we of for XXXX understand what seeing relates how year? calendar your little -- think

Ruy Cunha

guidance to products our so for crop. for ability the soy mostly reason deliver mentioned the Ben, Yes. on what we is the revised time about

of basically it But last underway. we call, our of from have is announced we Brazil. what in company for footprint we, does And very maintaining growth through years, over the saw and the at So a obviously, stores as an ones. most aggressive in we looked optimization. we're This there's optimization, impact footprint and it footprint our initiative grew and a not opportunity nearby stores consolidating that profitable an acquisitions the last

should we be XX [Technical around Difficulty] stores. result, reduce to a something As able

Benjamin Theurer

Hello?

Ruy Cunha

line think the I that dropped.

Benjamin Theurer

I heard like you of around you. Yes. that's that like said, kind when something lost stores or something and like I XX just --

Ruy Cunha

The [indiscernible].

Benjamin Theurer

dropped. line The

Ruy Cunha

that. for Sorry

Benjamin Theurer

No, no, worries.

Ruy Cunha

Ben, we'll keep details would year, as provide it's and answer far I'll finishing cost-saving next just more year the as the the that something benefit progresses. how as initiatives probably

Operator

Ruy, connected? are you

Ruy Cunha

hello? Hello,

Operator

line Canaccord. question is the Moeller next Austin from of Our with

Austin Moeller

Is that Is precipitation to on to really do improving. are only purchasing? new be activity? levels boost So just here? the there from option Or based cash the the collected the we've the government will the can harvest data improve able it financing anything that to take

Ruy Cunha

I at not liquidity do that, profitability. something Austin, We crop think believe government that -- as the averse farmers yes, tough most will come year have more I We next happen But be the not moment. soon. in shape do improvement additional still are is And topic a that of much we now, in sense. plan. I going since will probably would see the this mean, the year providing to of is this that say, believe of that's risk to improved also, from

trying to and coming will news But government crop is their right from think they're also them. help this to most at see we have opportunity moment, So the should positive time, at a I sell actually of take the the as to do. We what farmers. look that what at still the

Austin Moeller

Right.

equation expect And have space consolidated retail to lease or seems side that be to just so demand within as since the demand the you now recovers, you do just improving? new sell the space of

Ruy Cunha

yes. So,

already very, clients. a base we I strategy, let's footprint In a very terms large of do have think of say, and comprehensive

of margins, which So trend is make and conditions. is interest continue consolidate position after the our tough market improving to that sure right year one our very now of main we

results. client the focus improve and main operational base our Our to is protect

there not base is for, priority tactical here say, movements, expand our I think but to and will there right now. let's be opportunities our

Operator

And do line Barclays. a Theurer, the have follow-up we Ben from of

Benjamin Theurer

had. just squeeze Let follow-up I that in the me here

well, how into this you and think about Brazilian impact geopolitics as the more So potentially could we look farmer sentiment. -- as

So with big kind et the of stuff be with obviously, a there announcements like the over against from that, potential that that in States of happened And cetera. has obviously, U.S. commodities tend the tariff United and all might agriculture buyers retaliation, lot be countries weekend, to

if spot bit it's as to go overall want remaining a of just these need an I initial Brazil the a some its and farmer to So about of itself like light the a Or the on helped kind are of somewhat just your better obviously, of bit thoughts forward better way? we that that side, destocking to that we get it FX this do moving could could a back has the feel issues, little you versus also now, into how how to in put closer but business, environment? sentiment through trigger you where year put into maybe willingness maybe go of want to BRL and just still BRL sentiment? And X little actually the ago, to how

Ruy Cunha

the farmers Ben, you depreciation the including, sentiment from ones also of say, coming let's always now, negative terms is farmers improved the a real either or and some feel right with So in the impact, more first I so to of grains. are as most think points production of right? positive, actually mentioned,

farmers, positive to to Brazilian in all environment U.S., the of the changes know. we election Trump when and the as was global comes that with being in XXXX, Now the in said, it effect

will think is the positive. the now, overall mood I things But need to analyze right we how develop.

on and major increase is that potash. decided known already Canada Mexico of it's think Obviously, a to Canada. producer I taxes the he

in prices So with in America production. fertilizer area this consequent and in changes might of the North have an impact

a be Brazilian also impact the even overall, extent. might to So prices China for though and a taxed lower positive on also have when soy to farmers positive this comes exports as it impact maybe will a

more. in news moving been expect and we I in terms terms we're of would ability lot still good their both also But of this export to Obviously, cautious think farmers, for equation. because I in overall, parts probably of So commodity positive prices news. a say a Brazilian it's there's

Operator

At back to you. call I'll time, the Thank turn remarks. now the for closing this management

Ruy Cunha

for you call. this thank in being again Well, with once us

But it is I improvement call think and and think the anticipated we in highly liquidity quarter outlined the first challenges what going comes for to some team But extraordinary can we we like mentioned. We're you. change. the focused expectations for that our when months. have results a I over showed and in that the the when margins they additional now, in we next to trends for Obviously, you And this in trends the have control will and would year. on challenging year overall we credit to posted I ahead. in is line the far. the profitability with market. job improving the so keep every the the management what Thank thank you thank The done

Operator

today's conclude will conference. This

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

Lavoro Limited (LVRO) 3 Feb 252025 Q1 Earnings call transcript