Lavoro Limited (LVRO) Q4 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative aspects: increased net loss, credit access challenges, and reduced gross margins. Although revenue increased, significant margin compression and higher finance costs overshadow these gains. The Q&A section indicates concerns about credit lines and unclear management responses, adding to the negative sentiment. With no share repurchase plan and a focus on operational efficiency due to market challenges, the outlook remains bleak. Consequently, the stock price is likely to experience a negative reaction in the coming weeks.
Key Financial Performance
Consolidated Revenue (Fiscal Year 2024) $1.89 billion, up 6% year-over-year, driven by a 61% increase in Grain revenue, particularly in barter operations.
Grain Revenue (Fiscal Year 2024) $209.9 million, up 61% year-over-year, primarily from strong barter operations.
Input Revenue (Fiscal Year 2024) Increased by 1% year-over-year despite headwinds from input price deflation and challenges in the market.
Gross Profit (Fiscal Year 2024) $268.4 million, down 19% year-over-year, due to input price deflation and a less favorable product mix.
Gross Margin (Fiscal Year 2024) 14.2%, down 430 basis points year-over-year, largely due to input price deflation.
Adjusted EBITDA (Fiscal Year 2024) $53.4 million, down 64% year-over-year, primarily due to gross margin compression and increased provisions for expected credit losses.
Net Loss (Fiscal Year 2024) $154.6 million, compared to a net loss of $43.7 million in the previous year.
Adjusted Net Loss (Fiscal Year 2024) $144.9 million, compared to an adjusted net profit of $30.9 million the year before.
Net Cash Flows from Operations (Fiscal Year 2024) $33.1 million, up from $20.9 million the previous year.
Consolidated Revenue (Fourth Quarter) $271.1 million, up 2% year-over-year, driven by a 41% rise in Grains revenue.
Grains Revenue (Fourth Quarter) $68.3 million, up 41% year-over-year.
Inputs Revenue (Fourth Quarter) $202.8 million, down 6% year-over-year, affected by lower Input sales in Brazil Ag Retail.
Consolidated Gross Margin (Fourth Quarter) 16.7%, down 100 basis points year-over-year.
Gross Profit (Fourth Quarter) $45.2 million, down 4% year-over-year.
Net Loss (Fourth Quarter) $77.2 million, an increase of $57.8 million year-over-year.
Adjusted Net Loss (Fourth Quarter) $76.2 million, compared to an adjusted net loss of $15.2 million in the previous year.
Brazil Ag Retail Revenue (Fourth Quarter) $192.5 million, down 2% year-over-year.
Inputs Revenue (Brazil Ag Retail, Fourth Quarter) Declined by 16% due to strategic decision to delay shipments to clients with overdue payments.
Gross Profit (Brazil Ag Retail, Fourth Quarter) $29.8 million, up 13% year-over-year.
Gross Margin (Brazil Ag Retail, Fourth Quarter) 15.5%, up 210 basis points year-over-year.
Latam Ag Retail Revenue (Fourth Quarter) $65.2 million, up 5% year-over-year.
Gross Profit (Latam Ag Retail, Fourth Quarter) $10.4 million, up 10% year-over-year.
Gross Margin (Latam Ag Retail, Fourth Quarter) 15.9%, up 70 basis points year-over-year.
Crop Care Revenue (Fourth Quarter) $19.9 million, up 87% year-over-year.
Gross Profit (Crop Care, Fourth Quarter) $5.8 million, down 29% year-over-year.
Gross Margin (Crop Care, Fourth Quarter) 28.9%, down due to product mix effects.
Adjusted EBITDA (Fourth Quarter) $2.1 million negative, down from $2.4 million in the prior year period.
Consolidated Net Debt-to-Adjusted EBITDA Ratio 4.2, or 3.4 excluding payables related to acquisition of subsidiary.
Brazil Distribution Net Debt-to-Adjusted EBITDA Ratio 1.7 times, below the 2.5 times limit.
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Operating Highlights
Crop Care Revenue: Revenue increased 87% to $19.9 million, driven by strong contributions from Union Agro, our specialty fertilizer business.
Farmer Profitability: Farmer profitability for crop year ’24/’25 projected to improve, with increases in local grain prices and affordability of inputs.
Market Outlook: Expect planted acreage for soy and corn to grow in low-single digits, with yields projected to improve by mid-single digits.
Credit Availability: Credit dispersed to farmers down 30% year-over-year, reflecting liquidity issues due to previous droughts.
Market Contraction: Expect Ag Retail Inputs markets to contract by approximately 10% for fiscal year 2025.
Gross Margin Improvement: Gross margins improved by 70 basis points year-over-year to 22.3% in the fourth quarter.
Operational Efficiency: Plans to optimize retail network by consolidating stores to capture fixed cost savings while maintaining service levels.
M&A Strategy: Focus on organic growth opportunities rather than M&A in the current environment.
Credit Strategy: Adopted a conservative approach to credit, delaying shipments to clients with overdue payments.
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Risk or Challenges
Revenue Decline: Inputs revenue in Brazil Ag Retail declined by 16% to $124.8 million due to a conservative credit approach, postponing shipments to clients with overdue receivables.
Farmer Liquidity Issues: Deterioration in small and mid-sized farmers' liquidity profiles, with a 30% year-over-year reduction in credit dispersed to farmers, amounting to approximately R$5 billion.
Market Contraction: Outlook for fiscal year 2025 anticipates a contraction of approximately 10% in Ag Retail Inputs markets, with modest volume growth offset by last year's price declines.
Credit Access Challenges: Farmers are facing difficulties in accessing credit due to recent repayment histories, exacerbated by the impact of droughts and lower harvest yields.
Bankruptcy of Competitor: The bankruptcy of a large competitor has created nervousness in the market, affecting credit concessions and overall market dynamics.
Margin Compression: Gross margin compression of 430 basis points to 14.2% for fiscal year 2024, primarily due to input price deflation and unfavorable product mix.
Operational Efficiency: Plans to optimize the retail network by consolidating stores to capture fixed cost savings while maintaining service levels, amidst challenging market conditions.
Economic Factors: Farmer profitability is projected to improve, but the overall market remains cautious due to previous drought impacts and current liquidity constraints.
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Guidance & Outlook
Revenue Guidance for Fiscal Year 2025: Projected consolidated revenues to range between R$8.6 billion to R$9.2 billion, with Inputs revenue between R$7.7 billion and R$8.3 billion.
Adjusted EBITDA Guidance: Anticipated growth relative to fiscal year 2024, driven by margin improvements.
Operational Efficiency Initiatives: Plans to optimize retail network by consolidating stores to capture fixed cost savings while maintaining service levels.
Market Outlook: Expecting Ag Retail Inputs markets to contract by approximately 10% in fiscal year 2025, with a focus on improving margins and operating efficiency.
Consolidated Revenue Projections in USD: Projected to range between $1.5 billion and $1.6 billion for fiscal year 2025.
Inputs Revenue Projections in USD: Expected to range between $1.35 billion and $1.45 billion for fiscal year 2025.
Adjusted EBITDA Projections: Expected to grow relative to fiscal year 2024.
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Shareholder Return Plan
Adjusted EBITDA: Adjusted EBITDA for fiscal year 2024 was $53.4 million, a 64% decline year-over-year.
Net Loss: Net loss for fiscal year 2024 was $154.6 million, compared to a net loss of $43.7 million in the previous year.
Adjusted Net Loss: Adjusted net loss was $144.9 million compared to an adjusted net profit of $30.9 million the year before.
Consolidated Revenue Guidance for FY 2025: Projected to range between $1.5 billion and $1.6 billion.
Inputs Revenue Guidance for FY 2025: Expected to range between $1.35 billion and $1.45 billion.
Consolidated Revenue for FY 2024: Consolidated revenue grew by 6%, reaching $1.89 billion.
Grain Revenue for FY 2024: Grain revenue increased by 61%, particularly in barter operations, totaling $209.9 million.
Gross Profit for FY 2024: Gross profit was down 19% to $268.4 million.
Gross Margin for FY 2024: Gross margin compressed by 430 basis points to 14.2%.
Net Cash Flows from Operations: Totaled $33.1 million positive for FY 2024.
Consolidated Revenue for Q4 FY 2024: Increased by 2% year-over-year to $271.1 million.
Inputs Revenue for Q4 FY 2024: Declined by 6% to $202.8 million.
Net Loss for Q4 FY 2024: Increased to $77.2 million, up from $19.4 million year-over-year.
Adjusted EBITDA for Q4 FY 2024: Was $2.1 million negative, down from $2.4 million in the prior year.
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Key Q&A
Q:Can you help us think about the cadence of your guidance for the fiscal year, how we should be thinking about first half versus second half and the order trends there?
A:We don't expect the seasonality to be materially different from last year. It will be broadly similar in terms of the quarterly and first half versus second half breakdown.
Q:Can you provide commentary on where channel inventories are today and any opportunities or risks associated with the bankruptcy of one of your large competitors in the region?
A:The trend line on input prices is stabilizing, and inventory is mostly normalized. Farmers are investing in area expansion and buying inputs, indicating strong demand despite some short-term noise.
Q:How do you think farmer profitability has changed and how does that affect their buying behavior?
A:Farmers are delayed in buying decisions and selling grains. However, there is a growing concern among farmers to secure input availability, which is accelerating demand.
Q:What are your thoughts on the sentiment amongst your suppliers and how the bankruptcy of a competitor has affected credit lines?
A:The conservative approach to credit was already in place before the bankruptcy. It will improve as farmers stabilize and start buying again.
Q:Can you discuss the timing of the coming planting seasons and when you think this may normalize based on historical data?
A:Soy planting in Brazil is about 40% of the total area, slightly delayed compared to last year, but progressing faster with recent rains.
Q:How are you thinking about your M&A strategy with retailers in this environment?
A:We will focus more on organic growth opportunities rather than M&A, as we see more potential for market participation.
Q:Review of Unclear Management Responses
A:Management's responses lacked clarity on the specific impacts of the bankruptcy of a competitor on credit lines and supplier relationships, as well as the exact timing for normalization of planting seasons.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Input sale
Inputs
Julian result
Ruy Cunha
Theurer Barclays
Tigran Head
bag corn
cadence
cash flow
combination grain
competitor
cost saving
credit farmer
credit system
debt ratio
drought
dynamic
farmer liquidity
finance
grain price
issue
lender
loss increase
margin compression
margin improvement
market line
month concern
opportunity
package
point basis
result Brazil
season farmer
sense
side
soy
store
LVRO Transcript
Lavoro Limited (LVRO) Q4 2024 Earnings Call Transcript
Unknown11-1
The earnings call reveals several negative aspects: increased net loss, credit access challenges, and reduced gross margins. Although revenue increased, significant margin compression and higher finance costs overshadow these gains. The Q&A section indicates concerns about credit lines and unclear management responses, adding to the negative sentiment. With no share repurchase plan and a focus on operational efficiency due to market challenges, the outlook remains bleak. Consequently, the stock price is likely to experience a negative reaction in the coming weeks.
Lavoro Limited (LVRO) Q3 2024 Earnings Call Transcript
Unknown6-4
The earnings call highlights significant challenges: decreased revenue in key segments, margin pressures, and a net loss despite some growth in specific areas like grains and Crop Care. The Q&A reveals uncertainties in future revenue and no expectation of further pricing cuts, which could stabilize margins. However, the overall sentiment remains negative due to ongoing financial pressures, adverse market conditions, and a weak adjusted EBITDA. Without a market cap, the stock's reaction is uncertain, but the negative financial trends suggest a likely decline in stock price.
Lavoro Limited (LVRO) Q2 2024 Earnings Call Transcript
Unknown3-8
The earnings call reveals mixed signals: while Crop Care revenue and gross profit grew significantly, overall consolidated gross profit and adjusted EBITDA decreased due to input price deflation. The Q&A section highlights uncertainties, such as the impact of safrinha corn sales and farmer bankruptcies. Despite some positive outlooks, like Crop Care's growth and sales staff expansion, the lack of clear guidance and declining financial metrics suggest a neutral sentiment. Without market cap data, the stock reaction is uncertain, but the mixed results and cautious outlook likely lead to a neutral price movement.
Lavoro Limited (LVRO) Q4 2023 Earnings Call Transcript
Positive11-3
The company reported strong financial performance with significant revenue and EBITDA growth, particularly in the Crop Care segment. Despite challenges like postponed acquisitions and regulatory hurdles, the company projects continued revenue growth and has strategies to mitigate pricing headwinds. Positive factors such as increased gross profit and margin expansion, alongside optimistic guidance for FY 2024, outweigh the risks. The earnings call Q&A also highlights robust demand and growth potential, suggesting a positive stock price movement.
LVRO Report
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