Vittia Fertilizantes e Biologicos SA
BOVESPA:VITT3
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Vittia Fertilizantes e Biologicos SA
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[Interpreted] Good afternoon. Welcome to the video conference to present the results from 2024 from Vittia. This conference is being recorded, and a replay will be accessed through the website of our company, where the presentation will be available for download. We inform that everyone will only be watching the video conference during the presentation. And afterwards we will begin the Q&A session when further explanation given.
Before continuing, I would like to reinforce that the prospective declarations have the basis of the creed and suppositions of Vittia's administration and the information that are available currently for the company. This may involve risks and uncertainties. If we consider that they regard future occurrences that may or may not happen. Investors and journalists must consider that events related to the macroeconomic segment and other factors may make the results be materially different from those expressed within the respective declarations.
We have here in the video conference, Wilson Romanini, the CEO; Alexandre Del Frizzo, CFO and R&D Researcher; and Zanotto, Marketing Director.
And I would like to pass the floor to Wilson Romanini, who will begin the presentation.
[Interpreted] Thank you, Liz. First of all, good afternoon, everyone, and we will tell you how was our third quarter from 2024, giving you further explanation to show you the work that we have been performing within Vittia.
Well, our highlights, our gross revenue in the segment of the biological has reached BRL 82.7 billion, 20.9% less than the quarter from last year. This is important. We had a prolonged drought this year. We know that the biological segment suffers when you have a type of climate such as this. We had BRL 153.5 million in the 9 first months of this year, a drop of 10.2% being that the line of biological defensives had BRL 54.1 million, BRL 1.9 million less and BRL 115.7 million in the 9 first months, a growth of 5.6%.
The net revenue amounted BRL 209.4 million in this third quarter, 6.2% more when comparing to the previous year and BRL 530.8 million for the first 9 months, a growth 3.5% bigger when comparing to last year. The net result amounted BRL 45.8 million in the third quarter, less than 21% when comparing to last year and BRL 28.9 million in the 9 months, 48.4% less when comparing to last year.
The EBITDA adjusted has amounted BRL 83.2 million for this quarter, BRL 7.7 million less than when comparing to last year and BRL 71.9 million for the 9 months, 25.8% less when comparing to last year. The CapEx totaled BRL 9.1 million for the third quarter, 19.3% less than last year, BRL 26.6 million for the 9 months of this year and 30.5% less when comparing to the 9 first months of 2023.
Talking about the performance of Vittia in the third quarter, we have a higher revenue even with this challenging scenario that we have faced. How are we reaching this? We are seeking markets who have more favorable positions. So our work never stops when we seek our participation increasing in the market. We had an interesting growth in the market of sugarcane. Our SG&A is aligned with the objective of our company. We have been working in containing and rationalizing our expenditure, focusing on the resources where we understand that we will aggregate value within our company.
The indebtedness is the work that we do. We have been doing this for a while. We know the agribusiness, and we know it has cycles by seeing so in the beginning of 2023, where we saw that truly the scenario was not as favorable, we knew that this would extend for this year. Then we have sought to truly rationalize. We have held our reins when talking about our expenditure, and we were able to keep our debt in a highly comfortable standard.
Talking about our risks and opportunities, the third quarter, as I have said, the year actually of 2024 after April was truly dry. And consequently, you have then a diminishing on the use of our technologies. Be it for the nutritional process or effectively in the biopesticides. We had a scenario in which the agribusiness has been going through a serious issue when talking about credit. Vittia made many concessions of credits and continues to do so. And this truly has left our company in a comfortable position. We had no issues in RJs. We have announced a small one in the region of Paragominas. It was around BRL 75,000.
The fourth quarter, we have a normalization of the weather. We have been working in an intensive manner, seeking what didn't happen. Of course, things should have happened in that moment, and they do not appear once more, but Vittia has been doing a work, and it believes that we are going to have a truly favorable fourth quarter when comparing to the third quarter.
Of course, the movement within this quarter is -- as you have the history of the company, it is not as intense as the third quarter. But we believe that we're going to have a fourth quarter, which is much more positive. We can see within the situation of the agro where producers are more cautious. There is a certain limitation when talking about credits. So purchases are happening according to the development of the crops.
We continue to have business. These are businesses that are done according to the position of the culture. However, the market is purchasing, feeling. There is an expectancy that is positive when talking about the climate for November and even December and January. So we believe that things will improve and be positive when talking about the productivity of the crops that are being implemented right now. Our positioning is always focused on being firm on our financial area. We are solid. This rationalization is what we have been talking about. You may have noticed in our SG&A that we have kept the volume of expenditure retention for the third quarter, and this is what we have been doing.
We need to have two things well defined. We need to seek revenue, but also we need to look within for us to not focus on things that right now are not as interesting to focus on. Strengthening, as always, our relationships, be it the commercial with producers, selling and cooperatives, and we have been working towards a present evolution of our biological solutions for protecting crops.
Now I will pass the floor to Frizzo.
[Interpreted] Thank you so much, Wilson. Good afternoon, everyone. Well, I will talk about the growth of our gross revenue. We had a mixed performance, surprising us positively when we talk about full year fertilizers, the solo micronutrients, we understand that this performance was above what we hoped for and above the conditions that we were facing.
We attribute this to our portfolio that is truly broad and our scale to be aggressive on businesses in this moment with greater conservatorship and the pressure for pricing. It has also contributed with some other crops that we have been working on to diversify our revenue sources. The area of biopesticides and inoculants ended up having a drop on the quarter, and this is due to the fact that this is a more sensitive product when talking about the weather, and it has a restricted shelf life, different from the full year fertilizers where we don't need to be as concerned about all of that.
Here, when we're talking about the pesticides, we are more concerned, but we understand that the -- in the fourth quarter, we will regulate this scenario on the purchase of the biologicals. When talking about the pesticides, we still have an accumulated growth for the year. And in inoculants, we have faced a competitive scenario with the entrance of some players and the market ended up being more pressured with this delay in the plantation in the line of soil conditioners and organominerals, we had a drop in the revenue within the strategy of reducing our businesses in this segment that has not been profitable.
But in the slide of our gross margin, we will have a positive third quarter within this strategy to sell less and have no prejudice. It's worth mentioning also that we have suffered throughout the year and also the third quarter, we have a pressure in prices for all of our lines. The input market has been receiving a lot of pressure. It's what we hoped for, mainly in the area of pesticides, but we could see that this also influenced all of the lines. We can see that we had a higher drop in the biopesticides and around 15% in the drop in prices. The other lines are around 10%.
Without a doubt, we needed to compensate with volume. And this challenging scenario in the market with a drop in prices makes us have a performance that is still much better than what the market has. So we can compensate this much like in the foliar fertilizers and soil micronutrients, we need to compensate this with a lot of market share and volume to allow for the growth in revenue.
Now going for the next slide. Due to this pressure in prices, we can see that our profitability is also pressured in basically all the lines, foliar fertilizers, biological products, soil micronutrients. We can see that in this area, we had a kind of stability. But throughout the year, we can see that we are losing the margin due to this drop in prices that we cannot follow in our costs as we have a little bit of the variable costs, but we have fixed costs like the foliar fertilizers where we cannot reduce. We already have a pressure from the growth itself of the inflation here in Brazil.
And lastly, as I had mentioned, the area of soil conditioners and organominerals, despite the drop in the revenue, we have a first quarter in which we practically are the same or are stagnated when we're talking about our harms in our strategy up until the moment we can recover this market. However, still within a horizon of a medium term.
About SG&A within our strategy, we have been keeping SG&A controlled. We may have seasonally some quarterly behavior. So in the previous quarter, we had a growth of SG&A that was above what we hoped for, for the year. And now we have seen a drop of 9%. We are still working towards having a stability, a growth with an inflation throughout the year with a low growth. We are actually attempting to follow this, looking at this very carefully to all that we spend on.
And as Wilson said, everything that we judge that we're now are not necessary. So I would like to highlight that we have been keeping what we understand that is the fundamental structure for our future. And this both for our P&D as well as our sailing, we can see that we are keeping the coverage in all the regions that we are present in. We keep our professionals in the field. We are trying to adjust what we understand and what can be additional for this current moment, like some expenses, services for consulting and all of that.
Now for the next one. Due to basically our drop in the gross revenue, we had a drop in the EBITDA. As we can see, the major negative contribution comes from the gross margin, mainly due to this pricing scenario that has been pressuring our margins.
Okay. Going for the next slide, talking about the CapEx. This year, we didn't have major investments. This was what was hoped for. We have the most relevant thing here, a new investment in the plant of macro biologicals, macro pesticides for us to improve our fermentation, an investment that is already concluded. We have our plant with a capability that is still waiting to be occupied and investments this year are marginal when we talk about what we invested in the previous years.
Regarding the cash flow, we have had a good performance throughout the year. We were able to finish up September with a net debt that was similar with the one in last year. However, we emphasize that beyond what we distribute every year, we also had the repurchase in the first 9 months of the year, BRL 38 million. So if we had not executed repurchase, we would still have a substantially lower debt than September of 2023.
And anyhow, in any of the scenarios, we understand that this is a comfortable level being below the EBITDA and this makes it comfortable for us to go through any turbulence in the market, which will allow for us to continue to build our business looking at a long term and hoping to have newer demands.
The financial result, we had a better performance throughout the year and the quarter, although we had an inversion of the curve for interest. When we get the period of 9 months of 2024 when compared to last year, we have a net debt that is smaller as well as an interest rate that is smaller. You have seen the net debt in September is truly similar. However, when we get the monthly average, we have 20%, 25% below of 2023. In terms of net debt, we also have around 20% of cost for this debt that is smaller than last year.
When talking about income tax and social contribution, we have a worse performance as was hoped for with the end of the subversion that was announced last year. We now come to have an Aqua that is superior due to this change on the legislation. When talking about our final line, we revert what we have accumulated in the first 6 months of the year. However, we have a smaller profit when comparing to last year, both in the quarter as well in the year for the 9 months.
Now I will pass the floor to Edgar Zanotto, our Marketing Director, who will give an overview of our R&D investments.
[Interpreted] Thank you, Frizzo. Well, I will talk about what we have spent in this area. The other friend is not here. So I'm here substituting for him. So we continue to have investments in R&DI that were aligned with what we had last year. As they were saying, we did not reduce the investments, and we continue to follow the same proportion of 3x1 that we do for the biological products as well as in fertilizers, both for the quarter and the accumulation of the year. We have been trying to keep this as it's fundamental for the company to continue to grow and keep on having good margins for its products.
So we have some things that are still being developed. We have new usage recommendations for some projects that were already registered. We had 13 temporary special registries for us to take our products to the Ministry of Agriculture. These are innovative microorganisms. When we talk about them, we are talking about microorganisms that are different from what others have been working on and they have different results with a higher quality than what we are seeing nowadays. And we have others focused on new improvements in the microorganisms that we know from the species that we know of and we have been saying that this takes a while to be released, but now we are getting closer to release it.
And it's also important now in November, we had the registry, the publication of our new registry. Is the typical [indiscernible]. It's where we use minerals to do that, which is for the main diseases in the cultures in the crops. We are talking about a protective fungicide, which has around BRL 7 million with an innovative product of low volume for vast application. People now have difficulties to use the products that we have in the market right now. So we're going to enter the market right now to disclose this product. We were hoping for it to be released in the middle of this year. However, we had some steps that needed to be fulfilled. So we ended up delaying it to November. So we are going to begin to disclose this. We are ready for that and begin to commercialize it.
Well, that's it. Now Frizzo, you can talk about the stock market.
[Interpreted] Thank you Edgar. Well, talking about the stock market, we have had a pressure when talking about this challenging scenario for the agro and also adding this to the challenging scenario of Brazil in general. And it's worth to highlight here are our repurchase programs.
In 2024, we have finished the second and the third program, canceling the actions that were accumulated for this repurchase and opened our fourth program with more BRL 4.5 million, presenting 3% of the social capital. This is essential right now in the circulation of the price when talking about the fundaments. We can now use this opportunity for the shareholders in our base and we can see this as a good use of our resources. Also always keeping our solidity and without pressuring our leverage, so we can also be comfortable when talking about our operations to see the opportunities that may appear in the market.
[Interpreted] [Operator Instructions] Our first question comes from Gabriel Barra, sell-side analyst from Citi.
[Interpreted] I think I have 2 things to mention. The first one and what you have said about the leverage, we can see that you have a cash flow that's truly comfortable even though we have this challenging scenario. As you have said, when talking about the buyback that you did a program, we have been discussing in some previous forum on a possible M&A, but I would like to understand this moment. Looking at this capital structure, a more comfortable balance with the stocks in lower standards than what you have seen previously, how should we think about the allocation of capital going forward? Should it privilege buyback, continue to take it to other areas? I would like to hear more about that.
And second, about the biological products. Right now in this challenging moment, it seems that rural producers have diminished the work with technology. We can see that this area is suffering, and we have seen many people entering this market. So this dynamic of volume and margin, I would like to understand where this impact is coming from, especially in the margin? If it's a little tight, should it be normalized? Is it more about the market, more competition, bringing this margin down? I would like you to explain more how do you see this competitive scenario for biological products going forward?
[Interpreted] Okay. I will begin here. Later, I will pass it to Frizzo so he can talk about the leverage processes, M&A. Well, when we talk about the biological products, within the market, there is a logic when we have a tighter market in terms of revenue for producers, pressuring costs, they will think always the same thing about what we do. They will think about where they will invest their money and how -- and we have been noticing something very clear.
Everyone wants to follow their crop well. We had a drought that has never been seen before. After April, we saw rains coming back in October. Producers. I mean, what have they done? They said, well, it's not raining. There is no expectation in prices. So I will hold my rains on everything that I can do. So nowadays, there is a clear perception from producers that they want to continue with their crop, and they will make their applications according to how this is going. Of course, you have many markets.
I always say we sometimes generalize, for example, soy, we are talking about 90 million hectares, and we had many crops. They are following this. They are seeing how this is working. And they ended up seeing that there is a positive expectancy. And without a doubt, they are having better prices. The United States has already announced a drop in production of soy. So the market changes. The market is truly dynamic. What we are living right now tomorrow may be different.
The issue of the margin of biologicals, we have been talking to you that there are possibilities for drops. What I see nowadays in some projects, they are reaching their limits, but we have other ones that have the capacity of absorbing a pressure. This is truly clear. What is Vittia doing? It's running, as Edgar said, in a very intensive manner, seeking innovations so we can effectively operate at levels that we think are more satisfactory for the investments that are being made.
So the area of biologicals, what I can tell you is that we have many things entering. We have people coming in the market, which is completely different from what we had last year, hoping for numbers that will not happen with the current technologies, and this is a fact. I think that there are people nowadays investing too much and hoping for the numbers of the past. They will not come anymore. This is a fact.
Even if the market improves, gains traction, these numbers will come for those who invest, who have R&DI, who will bring innovations. It's truly interesting when you get the technologies that we have nowadays, they are those who were developed 30 to 40 years ago and have been researched on. So everyone entered, people noticed, producers noticed that this will bring an interesting result for them.
However, they began to have some issues happening like in the inoculants, we had many people in the inoculants market. We initially did not want to enter on this fight in prices. We have restricted this initially. The market has been losing some major businesses. So we had inoculants 2 points that were the loss in business and effectively an accentuated drop in prices, and we have reached our limit. This is a project that ,I mean, I believe that there will be a certain recovery in prices. But that's it. When talking about the biological products, I don't know if I was able to clarify to you, but that's it.
When we talk about the leverage, I have said in the beginning that we - well, I have been working on this market for more than 30 years. I have seen excellent years, difficult years and the best way to operate within the agribusiness is to truly have a leverage level that is ease. We know that we are over leveraged. We understand that the company is priced outside of the reality of what we have, and we had a buyback program. We have purchased. We have made a new program.
Now we want to fill the market a little bit more. How is it going? We have an expectancy to have a 2025 that is not as simple when thinking effectively that the South Hemisphere will suffer a little bit. But with a more mature market, when talking about the more problematic issues when they leave, we are going to see what we can do about that. The M&A issue, we are looking at it all the time. But we are looking -- well, we want to do it right. We will not mainly in this moment, enter on something that you are questioning that may hinder the company as a whole.
Well, that's it that I can tell you, Gabriel. I think that if Frizzo wants to complement or Edgar?
[Interpreted] Well, I will complement the M&A and allocation of capital, and it would be worth for Edgar to talk about this as a Marketing Director on the biologicals and this competitive scenario.
On the allocation of capital, as you said, we are over leveraged. We have a space for movements. We look at M&A every time. But as you have followed the market, you can see that the private market is more expensive than the public one. and we need to think about the improvement in opportunities for our shareholders. And for now, we have to repurchase our shares. These years, we have spent BRL 38 million. We may repurchase more. We have capability for that, and we will be looking at it. What is the best allocation of capital for our investors.
M&A belongs to our DNA. We are looking at it. However, we can see some detachment in prices in the private one. And without a doubt, this restricts our movement. And we also believe that the market at a short term is not that clear. As Wilson said, we may have a next year that is as challenging as this year. However, the interest rate can be truly high. So we still need to have a lot of criteria to allocate M&A, which is a risk movement when compared to the repurchase. Repurchase, I mean, we put the money where we know that it's safe.
So M&A always has an additional risk. And of course, there are synergies. So as we're saying, we need to be truly bright on our target. And to take us from such a comfortable position as we are now needs to be something different, which up until now, we have not seen in the market.
[Interpreted] Okay. I will speak a little bit briefly about the biological market. It still has much to evolve as a whole. So we have a small part of what we have in biopesticides. We continue with the project of education and with producers, with diversity, consulting, even to equate the knowledge of everyone nowadays. We were talking before entering here about a major client that we have. We had a lot of time, and we still do not understand that within the species that we have organisms that will be bad for the plant.
So I mean, until they understand that it's still a biopesticide, we have a long way ahead to surpass this. So we have a major space to grow. We continue to believe that the biopesticides will represent more than fungicides and not herbicides, but even soon due to the new technologies that are arising. So beyond all of that, we are prepared to come with new technologies to facilitate producers' lives.
We understand that soon, we shall have technologies that we won't need to have a chemical complement to make it more sustainable, and this will give us security. So we have these 2 areas to grow, the pressure for prices is normal when producers are having setbacks. We know that they will work on what they already trust or they have already done. We had new registered projects, but we have seen that we have many things that were badly done last year and are not being done anymore. We have seen [ conform ] and this major groups purchasing industry products, and this is representative, and we start to see this here now.
So this is a view that I have on how we will continue with this market. We have much to grow. There will be a major change on those who have the better technologies and a change from chemical to biological that is still too big in the close future.
[Interpreted] Our next question comes from Pedro Fonseca, sell-side analyst from XP.
[Interpreted] I would like to read a portfolio with you. I think Wilson spoke in some of the last calls that the market perhaps may have become more gourmet through time than what was hoped for. My question is, how do you see the portfolio of Vittia when we talk about the competition? Victor spoke about new products that are going to be launched, the new launch pipeline. So I would like you to pig back on this your portfolio versus competitors. And eventually, if it makes sense to think about growth in other areas in which you don't have that much scale, but with a less challenging scenario like soy, sugarcane and so on. This is my first question.
The second one is the perspective for the off-season products. What do you see in terms of growing area? What do you believe that can be a growth in volume? I understand that there may be easy comps when you talk about the off-season crops. So I would like to understand these perspectives for the growth, thinking about off-season crops.
[Interpreted] Okay. Portfolio is to me. No, Edgar is speaking. I'm sorry, I have said Henrique. Now people are used with him being here.
[Interpreted] This is my first time here. Well, about this is that we truly have many companies that have registered the microorganisms that everybody knows that they are available. So it's in this sense, truly this has happened. But the quality, there is still a difference. These are things that people started to talk about. Previously, we saw that there was no differences everything was the same, what you make in the farm always cheaper. Now you begin to have a separation by quality. At least this is the view that I have here that we begin to have this. But these are still the same macro organisms, so you have [indiscernible], the silos for controlling certain other insects. These are common products. What we are doing right now for the future is to seek innovative things which are truly different.
Registry of products is still an interest barrier, but it's light for what's something that already exists. But when we talk about the products and new species, we have ones that nowadays in our collection, we had no reports in Brazil. So we had to request the university to make the first report. Then you have a thesis for ANVISA, then you request for the hatch. So it's not something to say, well, now we can register this in 2 to 3 years. This is not a reality for innovative projects. So perhaps things will still not happen as fast as people hope for it. But we have 5 projects that are truly different. But it's not because it is a new species because it works much better than what we have nowadays when we test our results with lower dosages.
So this is what we are seeking nowadays, things which are innovative in the R&DI and the time that we invest on. To make it clear, it's not easy to find something that is truly innovative. We have a collection of our own microorganisms. It has more than 7,000, it's important to work on it. So we have the DNA sequencing, the study of 5% of what we have there. This is an enormous speed that we consider even when we compare on what we have at best in the world with what we have as a capacity. So we will have different projects. It will take a while. We need to go through the registry step. It's not as fast. This is where we have been working on to make a differential and have a complete portfolio.
[Interpreted] What was the other one, the off-season crops?
[Interpreted] Yes, yes.
[Interpreted] I will just talk about, Edgar said about something truly important. Nowadays, I think actually, I'm certain that there were many products coming to the market. We have many manufacturers coming in, and the main thing is that no one has a manufacturing company. It's a third party that ends up assisting these guys. Those who nowadays truly have a manufacturer that have a substantial production is Vittia.
So one thing that will be truly important within this process is the scale. Those who do not have scale won't be able to compete within this market, and that is truly more challenging. Another important point is product quality. Edgar said it really well, what is done in the rural properties. It has its limitations in terms of quality. We had a work from Dr. Mariangela showing all the problems in terms of pathogens for plants, for human health, and there are products and products.
One of the things that Vittia really likes, it's truly the quality of what it is offering for the market. We have a clear perception. This happens in the repurchase process. The person begins to go outside the pricing and seeks efficiency. The market is perceptive, in certain moments it takes a while, but things happen.
When talking about off-season crops, we expect despite a delay in plantation in areas that should have been planted earlier like Mato Grosso, the southwest of the Goiás. It had a process that was more interesting and other regions that begin later. The anticipated themselves, and this may generate a higher rate of off-season crops. We understand that we shall have this within what we had last year.
An important point is that nowadays when we see the price of corn, it has been increasing in an interesting way. Nowadays, this issue of having corn to manufacture ethanol ends up taking an interesting volume of product in the market. We believe that off-season crops will be positive this year. We have a good climate right now. We are in a period with a weaker La Nina, a more neutral process. So we understand that off-season crops will respond in a more positive manner this year.
[Interpreted] If I could just ask you Edgar, we have here a rule that the time to market of a new product would be around 5 years. Of course, not talking about the 30s and all that, but the period of registry would take around 5 years. Is it still like this or not?
[Interpreted] Yes, yes.
[Interpreted] The Q&A session is closed. I would like to pass the floor to Wilson Romanini so he can make his final comments.
[Interpreted] Well, today, we only had 2 questions. Well, guys, thank you for being here. You can see the story of our company. We here in Vittia, as I tell you, we have a true proposition on what is truly happening in the market. This is a philosophy of the company. We won't change, and we understand being truly transparent within all the problems that we have been living on since 2023 up until right now. We know that this will not end from night to day. I think that we are having a positive work looking at growth possibilities, having a regulation on what it needs to do internally. This is our work, of course, we don't want to forget to invest on what brings us a return in investments at a long term.
This is our story we shall continue here, and I'm certain that we will finish this year in a positive manner, of course we always want more. This is the thesis of any type of work, but that's it, let's finish this year well and go on for 2025 with our right foot. We believe that we will have challenges, but the major ones that we had looking back at the end of 2023, beginning of 2024 will be smaller. This is the message that I would like to pass to everyone, more or less that. Thank you so much once more.
[Interpreted] The video conference is closed. The area of Relations is available to answer any other questions. Thank you for the participation, and have a good day.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]