Vittia Fertilizantes e Biologicos SA
BOVESPA:VITT3
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Vittia Fertilizantes e Biologicos SA
Earnings Call Analysis
Summary
Q2-2024
Vittia's adjusted gross revenue from the biological segment surged by 76% to BRL 20.7 million this semester, while overall net revenue reached BRL 99.9 million, a 37.3% increase. Despite a tough start due to climate issues, the second semester showed recovery. However, net income remained negative at BRL 17.7 million. The company anticipates more stable prices and margins in the upcoming months and is focusing on innovative biological products and efficiency improvements to enhance future growth and profitability.
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Good morning to all. Welcome to the video conference results sharing of the Second Semester of 2024. This video conference is being recorded. You may access it on our website where the presentation will also be made available for download. We would like to inform that all participants are only watching the conference. And at the end of it, we'll have a Q&A session.
Before we start, I would like to reinforce the declarations and perspectives are pertaining to all of the available information for Vittia. These declarations can involve risks and uncertainties, given that it talks about future events and depend on things that may or may not happen. Investors, analysts and generalists may take into account that anything pertaining to the segment and other factors can make so that the results are materially different than those expressed here in the respective declarations.
We have here Wilson Romanini, Alexandre Del Frizzo; and Henrique Monteiro. I would like now to pass the floor to Wilson Romanini, who will begin the presentation. You may proceed.
Thank you very much, Lee. Good morning to all. We are here presenting to you the results of our first semester. I would like to talk a little bit about the first numbers and then give you an idea of how things have been happening. The adjusted gross revenue from the biological segment reached BRL 20.7 million in the second semester, 76% superior to that of 2023. As we say, the semester of 2024 is BRL 70.8 million in relation to 2023, that's an 8% increase. With the biological defensives line recording adjusted gross revenue of BRL 17.5 million in '24, 90.9% superior to the second semester of 2023. And in the semester, we have a revenue of BRL 61.5 million, representing 11.7% superior to that of the first semester of 2023.
Our net revenue amounted to BRL 99.9 million in the second semester of 2024, 37.3% superior to 2023 and a total of BRL 221.5 million, an increase of 0.01% in comparison to 2023. We had a very complicated first semester regarding climate change, costs for rural producers. So we see here an interesting recovery in the second semester. The result was -- the net income was negative of BRL 17.7 million, 21.6% superior to 2023 and BRL 16.9 million in the semester, 740.8% in 2023. The adjusted EBITDA was negative by BRL 18.1 million in '24, minus 2.6% in comparison to the second quarter of '23 and BRL 11.3 million in '24. CapEx, we had a total of BRL 10.4 million in the second semester of '24, 34% in comparison to the second quarter of '23 and closed the semester with BRL 17.4 million in comparison to '23, which is a reduction of 37.3%.
Now talking a little bit about our performance during the second quarter of '24, we have a growth of all segments. This is a job that we have adopted and approached our clients conducting a more enhancive work is strengthening everything in our commercial network. We know that in the quarter, we are in a representative moment, but we see a recovery taking a look effectively at the second quarter of '24. We've also had a very interesting receipt regarding our accounts that we have the harvest period and within everything that Vittia has been doing in terms of growth and receiving in a safe manner. We have a positive increase in terms of what we have received in appraised negotiations for [ 30 of '05 and 30 of '05 ].
Talking about the risks and opportunities, our current scenario, we have a harvest of '24, '25 is still challenging, given what happened in '23-'24, but we start to see more favorable things for the year. We have now an exchange rate that is more positive. You know that these commodities are more regular in this favors the pricing for rural producers. Rural producers have a good price both in real and in dollars. So this leaves them in a more comfortable position. We have a favorite climate projection for El Nino to La Nina. We know that this promotes a regimen that is easier climate-wise, so there is a possibility that is interesting for us to have a good harvest of grains.
We have also conducted work intensively in all the cultures throughout the year. And this has provided an interesting growth in businesses within Vittia. We've had a stock reduction. We've spent '23, '24 with high stocks, together with rural producers and companies of distribution, be it reselling or cooperative. So automatically this strengthens our position of sales. And we've had a decrease of inputs, particularly when we talk about NPKs. Automatically, this creates a more positive exchange rate for producers. We are also still working on biological products, and we've noticed very clearly the adoption of rural producers a well-perceived adoption.
In terms of our positioning, we are still investing a lot. I believe [ Henrique ] will show interesting things for you all. We've invested on PIE. So, the discipline and financial solidity is part of our work, and we can try to strengthen this together with our clients, be they rural producers, resellers or cooperatives.
I'll now pass the floor to Alexandre.
Thank you very much, Wilson. Good morning to all. Talking a little bit about adjusted gross revenue in this [ quartermaster ], we've had a growth in all product lines. It is marked by the beginning of the harvest '24-'25. So, we have already started to see more constructive scenario for the year, a trimester of low relevance in the world in the year. And in function of this, we have some percentages of growth that escaped the role of what is expected for the year.
And here I'm specifically talking about the numbers of biologic pesticide and defensives of 90%. Of course, there is this tendency to adoption, which we see as positive for biopesticides, not only in short or long-term, but that's not what we expect for the year. With regards to all the lines, we see a heated demand for this harvest, as Wilson mentioned, although there are challenges still present, when we think about matters comparatively, we have positive factors which are helping in this demand of revenue.
It is important to mention that we are still living through a price pressure in the first semester, this was very intense. We see the reflects of this in the numbers. We've had a drop in prices in practically all lines. And we are starting to see a stabilization in some of them, not in all of them, but some of them are stabilizing price-wise. And we hope that in the second semester, there will be a different scenario from that of last year. We'll have prices that are, on average, more stable, on average because some lines may have some modest recovery and others may continue to drop such as biopesticides. We see a drop in the second semester -- trimester in comparison to the first one, but it is within our expectations. And we hope that throughout the following months, this will be less intense in comparison to what has happened in the past trimesters.
Now moving on to the next slide. When we talk about gross profit and margin we've had in this semester, a drop in nearly all of our lines. We've had margin drops that were relatively small but are representative of this scenario of price, which we have seen in the past trimesters, and in the current one as well. And we hope for a stabilization of prices in the semester as well as the stabilization of the margin drop. It is worth mentioning that in our soil conditioners and organo minerals, although we have a smaller margin, which is negative in comparison to last year. It is still beyond our objective, which is zeroing the drop of this line, but we also believe that during the second semester of this year, we'll be able to attain this objective. We have seen a stabilization of the prices of NPK. We've seen a slight increase of prices. So we believe we'll be able to reach our target of stabilizing this line.
Now moving on to the next slide, talking a little bit about our SG&A. We've had an important point here in the semester. So, although we have presented a significant growth in revenue as well as general revenue because although there was a drop in terms of mixes, we've had a positive mix in such a way that the margin was consolidated and got near to stability. The expenditures of this semester grew, given the low level of revenue we've had here a seasonal factor that impacted the [ version ] of the provision we had made, given that this year we have constituted a provision. So this directly impacted when we looked at the semester and taking into account, we see an impact of around BRL 4 million, which is significant in this semester.
If we isolate this effect, the growth of SG&A would be below 10%. And so, throughout the semester in which we have this effect, the growth of SG&A would also be of less than 10%. Not exactly what we hoped for in a scenario of restructuring and contention of expenses or reduction of teams and structures, which is not exactly what we are looking for. But we have been looking for a certain level of contention and moderate expenses, which is below 0% to 10%, which is what we hope for the year. And today, with the current scenario, which is more conservative for the year, we'll probably manage to get closer to 10% for the year, understanding that the market is more constructive than we ever imagined at the beginning of the year when the initial planning was made for '24.
Now, in the adjusted EBITDA here in our expectations, we have left a positive EBITDA of 6.8% at the beginning of 2023 to a negative BRL 1 billion to BRL 11.3 million. As we mentioned, the greatest impact of this is the first trimester, which is still a reflection of the Harvest '23-'24. So we hope that from these trimesters, we have some kind of scenario change that shows a growth in comparison to the same period of the previous year. And we have the corresponding impact in the margin, which is also accumulated in the first semester of '24.
In speaking about CapEx, this is a moment in which we are organizing ourselves. Interpretation apologizes, but there were interferences in the participants speech. This year, there was a biological investment, which we call the microbiological plant of BRL 6.8 million that deals with the production ramp-up phase. We have an investment in the administrative office where we have already opened the commercial area in Ribeirao Preto. Our team is there since the beginning of the year. And until the end of the year, we'll also have a portion dedicated for the [indiscernible] management so that we can have a new office in Ribeirao Preto.
We've also had the conclusion of our microbiological plant in the first semester, where we are still looking for the ramp-up of the production. This is positive as expected, and we hope that during the second semester, there will be an even more positive performance in the portion of microbiologicals. This is an innovative project of [indiscernible]. This sector of microbiologicals represents a dynamic that is very different from all other segments from the standpoint of production. And we are coming with new technologies and a new approach, believing that this segment will have an important impact in agriculture and in the management. This is a project that is being restructured.
Now talking about indebtedness and cash flow management. We've had a positive result in terms of revenue of the harvest, differently from what we've seen in the market. We've had announcements of recovery and a substantial increase from 2023 to 2024, which I didn't have any kinds of cases of clients that went to the judiciary in depth. And we've had a very positive scenario in terms of revenue, even though there were delays, which is a characteristic of the sector, which are considered relatively normal. Consequently, we've had a positive cash flow in the period. We reduced the general debt in comparison to the same period in 2023 in 10.5%. And it is important to say that this reduction was truly an important payment of provisions as well as expenses that we've had in the repurchase. Both of these expenses added up to over BRL 70 million in the semester. And even so, we've had the reduction of the debt -- of the net debt. So in terms of indicators, there was an increase, given the decline of EBITDA for the past 12 months.
Interpretation apologizes, the participants Internet isn't working. I believe we are having some issues with the communication. If you could just turn off your camera, please. Okay. I'm going to try to turn the camera off.
From the point of view of financial results, we had a better performance than last year.
The problem persists. We apologize. We apologize. We cannot hear you.
If you could just move forward, please, we can go back to our other speakers. We had an Internet problem. Can you hear me now? Just to go back to what I was saying in terms of net profit and net margin, we had a drop from trimester to trimester given subventions. And when we've taken a look at EBITDA trimester against trimester, we have reached a near improvement and stability I will now pass the floor to it.
With regards to RDI investments, Vittia is still continuing with the investments planned for 2024, focusing on the development -- Interpretation apologizes, we cannot understand the participant due to Internet connection.
During the first semester 2024, we've seen an alignment with the volume invested in the first semester of 2023. There was an increase from 1 semester to another of 2.1%. We invested for BRL 10,336 000. We had a slight increase of investment in the development of biological products. We have an increase of 4% in comparison to the first semester of 2023. With regards to CapEx investments, we've had a considerable increase in comparison to 2023, an increase of 359%. We invested BRL 1,550,000 in the installments of new equipments for laboratories for [ PIDI ].
In terms of earnings, we've had, in the first semester of '24 from January to June, we've received the approval of 7 new recommendations of use of new biological products and targets for the control of new plagues and diseases, as well as product of the bioprospection work in the process and of our agronomic PIDI and regulatory actions department. We've managed a special temporary permission that allows us to move to the field with these new technologies to assess the efficacy for new plagues and diseases as well as to conduct toxicological tests. It is important to highlight that 4 of these, we are bringing new registries. So these are relatively innovative and are not yet present in the market. So we'll be implemented these technologies in the next harvest, '24-'25 for agronomical trials and to conduct registry for the following years.
I'll pass the floor to my colleague once again.
Okay. We still need to talk about stock market just to wrap up the presentation. I have already talked about our program. We have executed in 90% of the third program of repurchase. It is important to say that in the year, we have also executed this program. And part of it, we have added in the first semester, BRL 32 million of expenses with this program. And this shows that we believe in the buyback of the company and the value of actions is aligned with what we believe we have already talked about the reallocation of capital and the strategy of buyback, which is not of the interest of the company. We would like to do this in a significant manner. We want to be more and more exposed in the market. But we do understand that the price of actions has been detaching itself from the intrinsical value, and that in the interest of investors, we'll have to continue to execute this program. And we'll have to do so if the conditions of the market continue to be as they are.
We can wrap up the portion of the presentation and then move on to our Q&A section. We will now start our section of Q&A for investors and analysts.
[Operator Instructions] Our first question comes from [ Bruno Tomas ], analyst from ITBA.
I have 2 questions. First of all, I would like to understand more about the wallet of demand. I know you can't really expand if you could just superficially comment about the trimester or the first semester, just to understand how you were thinking about this so far, how this has performed at the same time that you imagine we can see the acceleration of this wallet.
The second question pertains to the system of recovery of rentability. Could you break down the influence of these potential levers that you've seen so far? So this comment pertaining to expense contention, lower-scale competition, these are many factors, and we want to understand how the contribution of these levers work? And what is the time line that you see for the company?
I will briefly talk about the wallet and rentability of inputs, and then my colleagues can explain. But talking about wallet, we've been conducting a very interesting work starting the third trimester or quarter, we start with the growth in 2 digits in terms of revenue, the wallet as well. We have a growth of 2 digits. The year, as we mentioned, is a challenging year. We've had now, and those of you who follow the market can see that the American harvest is a full one, much above the expectations. So we have an offer of grains that is higher than what was imagined and automatically that's what it is. You have higher offering. Demand doesn't really change. So you have a lowering of prices.
Something else that is important to say is that what we see reflected here in Vittia and all industries of the sector, be it chemical defenses, NPK, seeds. There is an accentuated drop for cost for rural producers. So everything makes sense. And producers, given the expectation of La Nina where the climate aspect tends to be more positive, will make investments. So this is reflected very clearly. And we see that at the moment, the second semester is truly where things happen in the Brazilian agribusiness. So we have here a wallet that is very interesting, as I mentioned, of 2 digits in terms of growth in comparison to the same period of last year, and we have started in July to see the beginning of the second semester with a growth of 2 digits. So we see that things have started. As I mentioned, we have challenges. They are many, but in a calmer way within what we've seen throughout the year of 2023. In the year of '23, we had very serious climate changes taken into account. We had the production cost, which was very high, [indiscernible] the logistics and COVID. So things have changed a lot within agro, and Vittia itself has been working and looking for segments that are creating more rentability for producers such as sugarcane.
The sector of HF, we haven't intensified our work in these localities in order to improve our performance. In terms of rentability, I always say the following. We have 2 edges inside the company, 1 is sales and the other one is expenses. Here, we have done since the beginning of 2023, structuring the sense, as you mentioned, we haven't just reduce the selling or field work, but certain things that we did see we could interfere on and wouldn't have a direct impact in the company in the year of 2024, we have worked on in a very intensive way. We have looked effectively for performance. And this is still happening in the fabrication sector. We are working in the optimization of the process. And we have control of this part.
When we move effectively to the front line, the market is the one that dictates the rules, and we know this. I believe that now we see a position that isn't very satisfactory. Everybody is looking for revenue to fulfill with their own obligations. So these are the challenges still, but I believe that Vittia is very well positioned for this year and for the following in order to do what needs to be done to satisfy investors, the market, and this is what we are working on internally. If you like to talk about this, in terms of expenses, maybe this will be interesting.
Well, talking a little bit about our expectation of revenue increase and EBITDA increase, we work with a scenario of image drop within the lines of biologicals themselves. We work with a reduction of an average of 10% reduction of price and so a drop in margins. But when we think about consolidated margins within the company in function to the mix, we hope to close the year with a superior margin compared to that of last year, by having [ FDNA ] under control and this average that of 10%. We also hope to have a reduction of this in a way as to deliver an EBITDA increase that is more robust. On the last line, we'll have an important impact of subvention. So we don't necessarily expect the same kind of growth in terms of liquid growth of net growth given the previous law, so -- and talking about the results of expectations, that's what I can tell you.
Our next question comes from Gabriel Barra from Citi.
I have 2 as well. The first one has to do with capital allocation. As this buyback program, it's been a while since we've been discussing the M&A potential, and there are some opportunities. And what it seems is that the market was prohibitive in terms of value. So there was a market readjustment, I don't know, perhaps a recovery of the average of the sector. I don't know whether this change the view with regards to M&A. I don't know how you see the situation. So, if you could just tell us how you see this from now onward, it would be interesting.
The second point would be pertaining to commerce regarding volume and margin. It seems to me that there was an acceleration of volume, and I don't know how much of this is explained as a strategy of commercialization, perhaps through B2B channels or others. So if you could just talk about the path of this and how this has impacted the harvest, whether this is a more macro or top-down effect in the sector.
Okay. I would like to start, Wilson. So we are still looking at opportunities, as we always have. I believe that the market is more active. So we have seen a great number of opportunities now, which make it more clear what the market conditions are. We've just undergone 2 typical years, 1 of an excessive optimism of 2022 and then an extreme adjustment period of 2023. And now I believe that we have a scenario that is more stable. And we have seen many opportunities and can provide more comfort for those who are buying as well as for those who are selling in terms of [ precipitation ] or pricing.
I think what is interfering within the decision is the factor that we've seen active particularly undervalued, especially our own actions in the market and the private market, which doesn't really work with us in the same rhythm. So, in reality, what we have seen is a devaluing of each year much more than other M&A opportunities. So we need to ponder a little bit these factors, but we continue to take a look at this in a very cautious manner as it is our characteristics. We've had some opportunities throughout the past years until we decided not to proceed, given the market instability, and I believe that we were very fortunate in our decision. And we have continued to take a look at this and believe that in some moment will reach an active that will address our strategic and price criteria given that some things are incredibly relevant and important.
Well, Gabriel, talking about commerce, of course, as I mentioned, we have a drop in prices of all matters. It's not just for our industry, it is for biochemicals, seeds and others. Of course, we've been working on increasing the volume of products in the market, particularly to find some kind of compensation in the sense. But when we talk about B2B, we do have the work of B2B, but that's not what is offering the growth of the company. The growth is effective in looking for rural producers, be it through direct sales or effectively together with our partners of distribution.
Just as a follow-up, particularly pertaining to what Alexandre has mentioned. I don't know if you could further explain about the potential targets, particularly in sectors, would it be macro, micro, biological or any other specific sector. I don't know if you could subdivide this for us.
Our strategy stays the same. We end up looking be it at new technologies, thinking about the synergy with our portfolio. And then, new technologies are geared towards biologicals, which is in our radar. But of course, in many cases, we stumble up on prices because we have a more mature company of biologicals, and so it doesn't make a lot of sense from the point of view of prices in terms of technologies that we can invest on. So we would have to carefully look at the situation and address all kinds of technologies. However, in terms of other supplies, complementary and special, we look at excess opportunities in the market. And then, we have companies of -- a high number of companies of bigger sizes.
And within pricing, we see reasonable numbers. So I think that we always need to look at either technology or market access. So accessing companies that have a penetration of cultures that we don't have or even regional companies, companies present in regions where we are not present just yet. And we know that Agro in Brazil isn't something that is built from the night day. So, there is always a value in looking at acquisition from this aspect, particularly if we manage to use this channel to implement our own biological technologies.
As I mentioned, we've been looking at new technologies such as the business that we've established of macro structure. But we've seen that the most interesting strategy is to look at smaller things to build, which have a current pricing that is much better than Vittia itself. As you have seen in the transactions that have been announced, at times with at least 50% multipliers, higher than Vittia, so we understand there will be a destruction of value. So we'd rather do a repurchase or buyback process.
Our next question comes from [indiscernible]
What is the mix of revenue of biologicals, please?
Well, I don't believe we have this information ready to go. And we'll open the mix of culture per line. We don't have it traditionally open. So afterwards, we can actually come in contact.
Our next question comes from Pedro Fonseca, analyst.
I have 2, and I apologize if this was already talked about because I came in late. But regarding the performance of the second trimester, where we've seen a significant growth of top line, the impression we have. And we also has already mentioned this, is that there was a strong drop in prices and increase in volume. And so, could you please tell us how does this happen per category? And in this regard, I would like to understand whether it makes sense to imagine that the company is now focused on market share. So using this more balanced capitalization for competitors, whether this makes sense. This is the first point.
And the second one pertains to portfolio. We have talked about certain trimesters, and Wilson has mentioned this, that it was a surprise to see how the sector and the products reached commodities standards that were different from what was expected. So perhaps my question is more for Henrique, but I wanted to understand the portfolio vision and how Vittia positions itself faced with other competitors and players talking about these portfolios?
Well, without a shadow of a doubt, Pedro, we have been looking for volume this year, be it within our own clients, current clients or new ones. We've even had a presentation of the Commercial Committee in the past week, and we've seen a growth with new clients inside Vittia in the order of 12%. Looking for market share, we look for this at all times. Agro has its own characteristics where you have 2 partnerships, Vittia has its partnerships and the competitors have 2 partnerships as well. And it is not easy for you to revert this in an abrupt manner. Things will happen as work is done. But when we take the demonstration together with this comedy where we've seen an increase within our world of clients of 12% of new clients, this is a lot. So we are truly looking for other cultures and focusing more intensively in other cultures, and this will position our company within this growth.
When we talk about portfolio, I don't know if you came in late, but Henrique did make a presentation showing that we are working intensively on this. So we have 4 new microorganisms within our thesis, which revolutionize the current technologies. We notice what we have in terms of biologicals in the market, whether we want to or not, has become very much explored by companies. So, in our functional mass, we are trying to look for innovation. I believe that Henrique can talk a little bit about this for you.
That's exactly right. We understand the needed importance of developing new technologies in order to provide the conditions of competitiveness in the future in the market and to deliver results to our clients, we are working and implementing a lot of investments in bioprospection, meaning in finding new microorganism types and species that are efficient, more efficient than our portfolio. And that the portfolio of the main competitors in the market, we are finding this, which is great news. And we are developing formulations that are more adequate for such microorganisms in order to bring synergy and increase of efficacy in the control of plaques and diseases. Through this work, we have managed to get the approval of 4 regs, which is the temporary special registry, which undergoes the assessment of [indiscernible]. So in order to take these microorganisms and formulate technologies to the field together with registry. So we are working on this and hope that in the next years, we'll be able to bring novelty to the market, novelty that places Vittia in a more competitive position, always delivering positive results for our clients.
[Operator Instructions] Our next question will once again come from Gabriel Barra from Citi. If there are no more questions, we would like to wrap up our Q&A session and pass the floor to Wilson Romanini for the final considerations from the side of the company.
Well, we are showing the closure of the semester, as you know, within agro. We always have a CBS that is stronger than the previous one. We are entering the second semester, as I mentioned, in a very interesting fashion pertaining to growth in July, a growth in the wallet that is above 1 to 2 digits. And I believe that we have brought many practices in terms of efficacy of our actionalizations in terms of expenses. We are conducting some work, which is very interesting new cultures, implementing specific teams for this. We have created teams for the sectors and big accounts. And there are many interesting things in terms of microbiologicals, Vittia never stops working. And what we think is that agro is here. I have been in it for many years, see very clearly these moments, and I believe that Vittia is very well prepared to go through these rougher moments, and that's it. This is our work. Let's continue firm in our goals. Let's have a year of '24-'25 of positive and enter '25 and '26 looking for the positivity. I would like to thank you all, and we are always available for questions. Thank you.
The video conference is done. The area is available to respond to other questions. We thank for your participation. Have a great day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]