Fertilizantes Heringer SA
BOVESPA:FHER3
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Fertilizantes Heringer SA
Earnings Call Analysis
Summary
Q1-2024
Fertilizantes Heringer experienced a challenging Q1 2024, with a 30% decline in net revenue to BRL 970.2 million, driven by the depreciation in fertilizer prices. Despite lower revenue, the gross profit turned positive at BRL 17.4 million, a significant improvement over the negative BRL 56.4 million in Q1 2023. Premium product deliveries increased by 80%, while conventional product deliveries fell by 8%. However, EBITDA remained negative at BRL 52.1 million, albeit an improvement from Q1 2023's negative BRL 139.5 million.
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Good morning, and thank you for waiting. Welcome to Fertilizantes Heringer conference call to discuss first quarter 2024 earnings results. Present with us today are Mr. Persio Pimentel Pinto Ravena. Chief Financial and Investor Relations Officer; and [ Inhiki Maya Rivero ], Regional Manager. [Operator Instructions].
Before proceeding, let me mention that any forward-looking statements that might be made during this conference call, regarding the company's business prospects, projections and operating and financial goals are based on the beliefs and assumptions of the company's management as well as on information currently available.
Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry conditions and other operating factors may affect the company's future performance and may lead to results that differ materially from those expressed in such forward-looking statements. I would like to give the floor to Mr. Persio Ravena, who will begin the presentation. Please Mr. Ravena, Go ahead.
Good morning, everyone. Let us begin the presentation here. And let's start on Slide #4. Let us talk about quarterly deliveries. The volumes we sold in Q1 2024. These volumes compared to the same period of 2023, we reduced 3%, 455,000 tonnes in Q1 '24 compared to 469,000 tonnes in the first quarter of 2023.
The reduction was mainly seen in corn crop, and this was due to the delay in soybean planting and consequently, harvest at the end of the 2023, which resulted in the reduction in area and investment for the second crop corn drop distribution of volumes, our soybean, corn, coffee and others. Well, that remained kind of in balance compared to the previous quarter.
Now moving to Slide #5. Here, we speak a little about the mix of products delivered. So the company started to classify two segments in 2024, which we call conventional products and premium product. Previously, the company broke down product groups into conventional and specialty products.
With the new segmentation and portfolio mix, we vacated the current classification to compare the volumes of the first quarter 2023, with those of Q1 '24. So now classifying products into conventional and premium.
In Q1 '24, there was a significant increase in the delivery of premium products with an increase of almost 80% from 28,000 tonnes in 2023 to 50,000 tonnes in Q1 2024. As for conventional products, there was a decrease of around 8% from 441,000 tonnes to 405,000 tonnes. On Slide 7, we present the results of the first quarter of 2024.
Among the main highlights of the period, we have net revenue in Q1 2024, net revenue totaled BRL 970.2 million, lower than Q1 '23, when net revenue was 1.38 billion despite the stability of raw material prices on the international market in Q1 '24. If we compare '24 prices with Q1 '23 prices, we see a sharp depreciation or reduction in the prices of fertilizers on the market, which contributed to a reduction of around 30% in net revenue when compared to the first quarter of 2023.
Regarding gross profit, in Q1 '24, gross profit was positive by BRL 17.4 million higher than the first quarter '23. When gross profit was negative 56.4 million. An important reversal when compared to the same period in 2023, representing a positive margin of 1.8% over net revenue. As regards SG&A, selling, general and administrative expenses in Q1 '24, SG&A totaled BRL 56 million, practically in line with Q1 '23, when SG&A totaled BRL 56.7 million.
In EBITDA, Q1 '24 for EBITDA was a negative BRL 52.1 million higher than Q1 '23, which was negative BRL 139.5 million. As regards to the breakdown of the financial results for the first quarter of 2024, we highlight the exchange variation in Q1 '24, which was negative at BRL 57.9 million, higher than what we posted in Q1 '23, which was positive at BRL 38.8 million.
The depreciation of the Brazilian real, BRL, the depreciation of around 3% against the dollar meant that the period ended with a negative net exchange variation of 57.9 million. Now talking about the cash flow for the first quarter of 2024.
The company ended Q1 '24 with cash and cash equivalents totaling BRL 50.7 million. The main items that make up the variation in cash are the negative result before income tax and social contribution, which was BRL 155.2 million, expenses that did not affect cash in the amount of BRL 86.3 million, mainly made up of interest and unrealized exchange variation.
A reduction in asset accounts in the amount of BRL 308.2 million, basically concentrated on inventory accounts due to the seasonality of the period. A reduction in liabilities accounts of BRL 322 million, mainly made up of suppliers and early purchases by customers.
Net investments of BRL 14.5 million, mainly due to investments to sustain activities at the plants and adjustments to meet safety standards. And with a positive net cash flow from financing activities of BRL 106.8 million.
Now I'd like to turn the floor to [ Inhiki Maya ] to continue the presentation.
Thank you, Persio. I will make a presentation about the evolution of prices of raw materials imported. On Slide 11, we have the 3 main raw materials that make up the product and mix of the company. And here, we show you the variation of prices from December '23 to March '24.
For year-on-year, a 10% increase in prices from March '23 to March '24, up 10% variation. Geopolitical tensions and increased demand in the North American market cooperated to this price increase into the maintenance of prices. For potassium chloride, we had a great supply of product in the market and a very favorable exchange ratio. So the prices remained low.
And this was the product that felt the most for the company this quarter. It has a large share -- high share in the product mix, and this was the product that had the greatest price reduction from March '23 to March '24, minus 3% comparing March '23 to March '24, potassium chloride had a 35% decrease in prices.
And for MAP, the Brazilian market is quite flat compared to the international mid given a pent-up demand. And this is raw material that remained, in recent times it did not follow the decrease in the other prices of raw materials. But it was the least sold. So this is a pent-up demand.
MAP in December 23 to March '24 remained stable, also lading just 1% from March '23 to March '24, a 10% price reduction. Not following the reduction in price that we saw for potassium chloride. On Slide 12, we will give you an update on the domestic grain production, planted area versus fertilizer consumption. According to the 8th CONAB survey referring to the 2023/'24 harvest disclosed in May.
Brazil should reach a harvest of around 295.4 million tonnes, a 7.6% reduction in grain production when compared to 2022/'23, which was a record harvest of 319.8 million tonnes.
And here, we see the fertilizer market in Brazil. Last year, 45.8 million tonnes.
We will now begin the Q&A session for investors and analysts only. [Operator Instructions]. No questions [ defer to ] listen to Heringer. Earnings conference call is closed. Thank you very much, and have a nice day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]