Lavoro (US:LVRO)2025-02-03 15:28Financial Data and Key Metrics Changes - In Q1 2025, Lavoro's consolidated revenue totaled BRL2.05 billion, a 13% year-over-year decline, primarily due to input price deflation in Brazil Ag Retail, partially offset by a 68% revenue increase in Crop Care [17][18] - Gross profit increased 10% to BRL321.2 million, with gross margin expanding 320 basis points to 15.6%, driven by improved distribution margins in Brazil Ag Retail [18] - The company reported a net loss of BRL267.1 million, compared to a net loss of BRL71 million in Q1 2024, reflecting an increase of BRL196.1 million year-over-year [19] - Adjusted EBITDA declined 5% to BRL54.4 million, impacted by higher SG&A expenses [20] Business Line Data and Key Metrics Changes - Brazil Ag Retail revenue declined 23% year-over-year to BRL1.55 billion, driven by last year's input price declines and farmer liquidity constraints, while gross profit grew 7% to BRL189 million [22] - Latam Ag Retail revenue increased 4% year-over-year to BRL337 million, benefiting from a 12% appreciation of the Colombian Peso [23] - Crop Care segment revenues grew 68% year-over-year to BRL293.7 million, with gross profit increasing 11% to BRL84.3 million [25] Market Data and Key Metrics Changes - The Brazilian ag inputs market is experiencing contrasting dynamics, with improved farmer profitability expectations for the '24/'25 crop year alongside stabilizing input prices [11] - Favorable weather conditions during the soybean growing season have improved yield expectations across Brazil, with local corn cash prices rising above BRL70 per bag [12] - Liquidity constraints in the agri business sector escalated significantly, leading to a decline in cash-based input purchases from farmers [14] Company Strategy and Development Direction - The company is focused on enhancing vertical integration between Crop Care and Retail operations in Brazil, which is yielding strategic benefits [8] - Cost-saving initiatives include retail network optimization and fixed cost reductions, with plans to consolidate several stores within Brazil [30][31] - The company expects to capitalize on early signs of end-market recovery while navigating inventory financing disruptions [30] Management Comments on Operating Environment and Future Outlook - Management expressed optimism regarding improved farmer sentiment in Brazil due to enhanced profitability prospects for the upcoming crop season [29] - The company updated its full-year 2025 outlook, expecting consolidated net revenue between BRL6.5 billion and BRL7.5 billion, with no anticipated growth in adjusted EBITDA compared to 2024 [27][28] - Management acknowledged challenges in credit and liquidity in the market but remains focused on improving profitability [80] Other Important Information - The company is experiencing significant inventory shortages in key product categories due to tightened inventory financing conditions [15] - Successful renegotiations with key suppliers in January helped ease some inventory bottlenecks, although full normalization has yet to occur [16] Q&A Session Questions and Answers Question: Guidance for 2025 - Management noted that the revised guidance is primarily due to the timing of inventory deliveries impacting the second half of the fiscal year [38][54] Question: Farmer Sentiment and Cash Conversion - Management indicated that improved farmer sentiment is linked to favorable crop conditions and expected strong yields, which should enhance cash conversion [44][45] Question: Store Count Reduction and Competitive Dynamics - The decision to reduce store count is part of a strategy to consolidate nearby stores while maintaining profitability, with no direct impact on the revised guidance [55] Question: Government Financing Activity - Management believes that improvements in farmer profitability will primarily drive recovery, rather than government intervention [64] Question: Geopolitical Impact on Brazilian Farmers - Management expressed cautious optimism that geopolitical changes could positively affect Brazilian farmers, particularly regarding commodity prices and export opportunities [77]