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01/11 04:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed mixed signals: strong revenue growth but significant EBITDA decline. The Q&A highlighted uncertainties in sugar pricing and hedging strategies, while management's unclear responses on Bitcoin mining raised concerns. Despite optimism in ethanol demand and shareholder support, flat cane crushing projections and high leverage offset positive aspects. The stock's small-cap nature suggests potential volatility, but overall, the mixed outlook and lack of decisive positive catalysts suggest a neutral stock price movement over the next two weeks.
Consolidated Adjusted EBITDA $55 million for the quarter, $91 million year-to-date, marking a 60% year-over-year decline. The decline was due to losses in biological assets, lower production in Sugar, Ethanol, and Energy businesses, lower prices in crops and rice operations, and higher costs in U.S. dollar terms in the farming division.
Sales $392 million for the quarter, $716 million year-to-date. Higher volumes sold across all operations offset lower prices for most products.
Crushing Volume (Sugar, Ethanol, and Energy) 3.4 million tons for the quarter, 4.9 million tons year-to-date, 20% lower year-over-year. This was due to fewer effective milling days and a selective slower milling pace.
Ethanol Sales 320,000 cubic meters sold at an average price of BRL 2,700 per cubic meter, 18% higher year-over-year. The increase was due to a commercial strategy to sell carryover stock and daily production to profit from price recovery.
Carbon Credits (CBios) 390,000 CBios sold at an average price of $10 per CBios, generating $4 million in revenue.
Net Debt $699 million, 11% higher year-over-year. The increase was due to higher short-term borrowings to finance working capital in the farming business.
Adjusted EBITDA (Farming Business) $1 million for the quarter, $18 million year-to-date. The decline was due to lower international prices, lower-than-expected productivity, higher costs in U.S. dollar terms, and an uneven year-over-year comparison due to a farm sale in April 2024.
Rice Yield 8 tons per hectare, a new record. Achieved through work on seed genetics and new technologies.
Net Leverage Ratio 2.3x, 1 turn higher than the same period last year. The increase was due to higher net debt.
Bitcoin Mining Initiative: Signed a Memorandum of Understanding with Tether to explore using a portion of energy production for Bitcoin mining, showcasing a potential innovative project.
Dairy Product Portfolio Expansion: Working on expanding the dairy product portfolio to access new destinations.
Rice Market Expansion: Leveraging seed genetics to offer customized rice varieties at premium prices and entering new markets.
Ethanol Sales Strategy: Sold 320,000 cubic meters of ethanol at an average net selling price of BRL 2,700 per cubic meter, an 18% increase year-over-year.
Operational Flexibility in Sugar and Ethanol: Enhanced ability to switch between sugar and ethanol production based on margins, ensuring better profitability.
Cost Reduction in Crops: Reduced leased area by approximately 30% to improve crop margins.
Debt Management: Issued $500 million bond with a 7-year tenure and 7.5% coupon, partially tendered 2027 Senior Notes, extending average debt life from 2.5 to 4.5 years.
Sustainability Alignment: Published 2024 integrated report emphasizing alignment of sustainability with profitability.
Weather Risks: Extreme dry weather and a cold front in Brazil negatively impacted sugarcane yields and crushing volumes. Additionally, uneven rainfall distribution caused delays in milling activities and reduced productivity.
Commodity Price Volatility: Significant declines in rice and crop prices have pressured margins. Lower international prices for peanuts and other crops, coupled with higher costs, have further impacted profitability.
Operational Costs: Higher costs in U.S. dollar terms across farming and dairy operations have negatively affected margins, despite increased production volumes in some areas.
Biological Asset Losses: Losses in biological assets, particularly in the Sugar, Ethanol, and Energy business, have contributed to a 60% year-over-year decline in adjusted EBITDA.
Debt and Leverage: Net debt increased by 11% year-over-year, with a net leverage ratio rising to 2.3x due to higher short-term borrowings to finance working capital.
Supply Chain and Production Challenges: Selective slower milling pace and reduced effective milling days in sugarcane operations have led to lower crushing volumes. Additionally, uneven weather conditions have impacted crop yields and harvesting activities.
Strategic Execution Risks: The decision to reduce leased area by 30% and planted area by 20,000 hectares to improve margins may limit future production capacity and revenue potential.
Sugar, Ethanol, and Energy Business Outlook: The annual sugarcane crushing forecast remains unchanged due to continuous harvest models, higher cane availability from plantation expansion, and increased sourcing of third-party cane. Cash costs are expected to remain flat to slightly higher compared to the previous year. The company is optimistic about sugar and ethanol prices in the upcoming months, with flexibility to switch production strategies to maximize margins. A portion of 2025 sugar production remains unhedged to capitalize on potential price increases. Ethanol inventory levels are below the prior year, and demand is expected to rise due to the E30 mandate and favorable pump parity.
Farming Business Outlook: Planting activities for the next campaign have begun, with a reduction in planted area by approximately 20,000 hectares to improve crop margins. The company is focusing on reducing exposure in the northern region and leased areas. In rice, record yields of 8 tons per hectare were achieved, and efforts continue to improve seed genetics and technology. In dairy, the company is working to reverse declines in cow productivity and maximize UHT milk production for the domestic market while expanding its brand portfolio.
Capital Expenditures and Debt Management: Expansion CapEx totaled $53 million year-to-date, with investments in sugarcane plantation size, harvesting equipment, rice mill capacity, and milk processing facilities. The company issued a $500 million bond with a 7-year tenure and a 7.5% coupon, using part of the proceeds to tender $150 million of 2027 Senior Notes. This extended the average debt maturity from 2.5 years to 4.5 years. Net debt increased to $699 million, with a net leverage ratio of 2.3x.
Dividends Approved: $35 million in dividends were approved for shareholder distribution.
First Installment: $17.5 million was paid in May, representing approximately $0.175 per share.
Second Installment: $17.5 million will be payable during November in an equal cash amount.
Share Buyback Program: $10 million in shares have been repurchased under the buyback program.
Equity Representation: The repurchased shares represent approximately 1.1% of the company's equity.
The earnings call presented a mixed picture with positive elements like increased cow productivity and ethanol production mix, but also significant negative aspects including lower sales volumes, higher costs in the dairy business, and a 29% decline in gross sales. The Q&A revealed concerns about leverage, unclear guidance on future dividends and financing, and a cautious CapEx approach due to weak pricing. Despite some optimism in sugar and ethanol outlooks, the overall sentiment is negative, especially for a small-cap stock, likely resulting in a -2% to -8% stock price movement.
The earnings call revealed mixed signals: strong revenue growth but significant EBITDA decline. The Q&A highlighted uncertainties in sugar pricing and hedging strategies, while management's unclear responses on Bitcoin mining raised concerns. Despite optimism in ethanol demand and shareholder support, flat cane crushing projections and high leverage offset positive aspects. The stock's small-cap nature suggests potential volatility, but overall, the mixed outlook and lack of decisive positive catalysts suggest a neutral stock price movement over the next two weeks.
The earnings call presents a mixed picture: strong net sales growth and a positive outlook for sugarcane yields, but significant declines in adjusted EBITDA across segments and increased net debt. The Q&A reveals optimism about growth opportunities and governance, but management's vague responses on expansion timelines and future size raise concerns. With a market cap of $1.01 billion, the stock's reaction is likely to be moderate, balancing positive sales with weak financial metrics and cautious guidance, resulting in a neutral stock price movement prediction.
The earnings report presents mixed signals: strong net sales growth and positive ethanol sales contrast with significant declines in EBITDA due to biological asset losses and lower production. The Q&A reveals optimism about future growth and improved yields but also highlights concerns over unclear timelines and increased debt. The market cap suggests moderate volatility, leading to a neutral stock price prediction as positive and negative factors balance each other out.
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