Ceres Global Ag Corp. (CRP) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Ceres Global Ag earnings call for their fourth quarter and year-end results for fiscal year 2024. [Operator Instructions] I would like to remind everyone that today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. For more information on the risks and uncertainties related to these forward-looking statements, please refer to the company's management's discussion and analysis available on SEDAR+ and the company's website. And now I would like to turn the call over to Carlos Paz, CEO of Ceres Global Ag. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Building on our new record 9-month performance, we maintained strong momentum and ended the year with the second best fiscal year performance on record. Our unwavering focus over the past 2 years on effectively trading our core products, navigating volatile markets, streamlining and maximizing our asset footprint and capitalizing on synergies across our network has allowed us to achieve this success. As many of you know, our business is exposed to weather in agricultural geographies and geopolitical events that have the potential to impact commodity prices. Over the past year, weather has positively and negatively affected crops worldwide. Additionally, various geopolitical factors, including ongoing conflicts in Ukraine, Gaza and Israel, have contributed to market volatility. We achieved the second best fiscal year performance in our company's history this fiscal year, with full year operating income of $16.8 million and net income of $9.4 million. This near-record performance was driven by effective trading, supported by our team of industry experts and robust risk management practices, aided by utilizing our extensive network of assets and partners and a strong joint venture performance. Ceres handled 5.5% fewer volumes this fiscal year, mainly because of our strategic divestment of the Port Colborne facility in Q3 2023. This move, aimed at streamlining our asset footprint and optimizing our operations around our core products, accounted for a 4% reduction in handled volumes. Looking at our Grain segment, operational improvements at our Farmers Grain joint venture have increased volumes handled by 12% this year. This high efficiency resulted from our focus on recruiting top talent, securing freight capacity and ensuring timely rail execution. We will continue to build on the solid foundation by exploring ways to maximize the potential of this joint venture. Meanwhile, volumes handled at Berthold Farmers Elevator were unchanged this year compared to last year, partially due to higher farmer retention over the last 2 quarters. Overall, our joint ventures have played an important role in advancing our farmer direct origination strategy, and will continue to serve as key breach heads (sic) [ beachheads ] for Ceres to reach producers and deliver unique value to customers. In our Supply Chain Services segment, we achieved higher volumes for this quarter and the full year compared to last year. The primary drivers for the increase were competitive rail logistics, increased demand for fertilizer products and the Northgate team's ability to handle higher customer volumes. We continue to see strong performance at the Gateway pipeline connection to Northgate, with volumes through the Gateway facility rising by 18% in 2024 compared to last year. Our Seed Retail and Processing segment realized record soybean crush volumes for fiscal year 2024. This success was primarily driven by our team's proactive soybean procurement and increasing operational efficiencies at the Jordan crush plant. As a result, yearly volumes increased by 14%, leading to record-breaking volumes and margins. I will now turn things over to Blake to review our financial results for the quarter. Then before we open the floor for questions, I will comment on the company's plans for next year and the exciting developments in our regenerative agriculture initiative. Blake?

Thank you, Carlos. Good morning, everyone. Starting with the financials for the quarter. Revenue rose by $3.9 million to $209.6 million from the same period last year. Gross profit also increased, by 8.3% to $5.4 million compared to Q4 of last year. Income from operations was $1.2 million compared to negative $1.8 million in Q4 of last year. Net income was negative $501,000 or negative $0.02 per share, up from negative $2.5 million or negative $0.08 per share. Adjusted EBITDA increased by 4.4% to $2.9 million in Q4 2024. Adjusted net income was negative $501,000, down from $1.5 million in Q4 of last year. Moving on to the financials for the fiscal year. And as Carlos highlighted, we achieved near-record financial results this year, with the gross profit rising 54.4% year-over-year to $35.2 million, the second highest on record. The increase was mainly due to greater trading opportunities across our core commodities and record volumes and margins in the Seed Retail and Processing segment. Revenue was $920.1 million, down from $1 billion, due to lower commodity prices and bushels merchandise this year. We handled and traded 97.1 million bushels of grain and oilseed during the year, down from 102.9 million bushels in the previous year. Income from operations was $16.8 million, the second highest in the corporation's history, compared to negative $2.7 million in 2023. Net income also hit a new record, totaling $9.4 million or $0.30 per share, compared to negative $7.9 million or negative $0.25 per share in the prior year. Adjusted EBITDA and adjusted net income were $22.6 million and $9.6 million, respectively, compared to $7.2 million and $2.8 million for the same period last year. Net trading margin was $42.2 million, rising 33.6% from the prior year due to higher trading margins across multiple commodities. Supply Chain Service revenue was $7.1 million, down from $7.7 million in 2023, mainly due to the sale of the Port Colborne facility in February 2023. Our net Seed and Processing margin was $8 million in 2024, up 21.1% compared to last year, primarily driven by record crush volumes and margins this year. General and administrative expenses were $18.4 million in 2024, down 28% as a result of severance expenses and legal fees last year, and partially offset by higher incentive accruals in 2024. Interest expense was $6.2 million, mostly unchanged compared to 2023. There was an income tax expense of $1.6 million this year compared to an income tax recovery of $865,000 in 2023. At the end of the fiscal year 2024, we had $62.3 million of working capital. This concludes my financial review. For more information, please refer to our MD&A and financial statements. I'll now turn it back to Carlos to provide some comments on our outlook for the next fiscal year and our progress over the past year.

Thank you, Blake. As we enter the harvest season, favorable weather in Canada and the U.S. points to higher-than-average crop yields, which will allow us to maximize our storage capacity and volume across our network of assets. Looking ahead, our team will closely monitor crop developments to capitalize on market opportunities and fully utilize our network of assets. In the Supply Chain Services segment, we anticipate increasing volumes due to competitor logistics challenge and increased demand for Northgate's transloading products. We should drive solid results for the segment next quarter. Meanwhile, our Seed Retail and Processing segment, we expect that the higher-than-average soybean crop production in Manitoba and our ability to source local soybeans will help us maintain high crush capacity utilization and achieve adequate margins to start the next fiscal year. Along with our strong financial results this year, we're particularly excited about the significant strides we made in our long-term strategy of delivering regenerative agricultural solutions to farmers and end users. We have announced several strategic partnerships over the past year, including collaborations with Trimex, Mexico's largest flour mill, and Lavie Bio, a leading producer of regenerative ag bio products. Most recently, we announced the expanded partnership with Miller Milling, one of the largest wheat millers in the U.S., to improve agronomic and environmental outcomes for wheat growers in North Dakota by incorporating advanced nutrient practices. In fact, during the 2024 crop year, we enrolled more than 6x the acres we enrolled in 2023. We also retained 100% of our grower partners on the program and expanded our network to include 2 new milling partners. These advancements highlight the strength of our partnerships and our ability to effectively deliver tailored regenerative agriculture and supply chain solutions to our customers. As environmental sustainability becomes increasingly crucial, Ceres, with its extensive network of partners, established relationships and experience in supporting producers and end customers, is well positioned to lead the adoption of regenerative agriculture practices. This time last year, we outlined several strategic initiatives that will be our primary focus for fiscal year 2024. This included identifying creative partnerships to expand grain origination, deploying regenerative agricultural solutions across the supply chain and maximizing the earnings potential of our assets. Our focus on these strategic initiatives was crucial to achieving near-record financial results. Another key contributor to our success was streamlining our asset footprint through strategic divestments, including the divestment of our stake in Canterra Seeds in July. This approach has enabled us to reduce debt, optimize our capital structure, lower expenses and concentrate on our core business. We remain steadfastly committed to our mission and vision of partnering with farmers and suppliers to enable our customers to do great things in the food, agriculture and energy markets. We aim to build on this year's momentum by continuing to execute on our core strategies and delivering strong results for our shareholders. On that note, I would like to open the call for questions.

[Operator Instructions] There are no questions at this time. I would like to turn the call back over to Mr. Paz.

Thank you, operator, and thank you, everybody, for your participation in today's call. We appreciate your support and look forward to speaking with you again next quarter.

Thank you for joining. This concludes today's conference call. You may now disconnect your lines.