Fertilizantes Heringer S.A. (FHER3) Earnings Call Transcript & Summary

Thank you for waiting. Welcome to Fertilizantes Heringer conference call to discuss third quarter 2025 earnings results. With us today are Mr. Gustavo Oubinha, CFO and IRO; and [ Marcelo Ferry ], Commercial Officer. We would like to inform you that this event is being recorded. [Operator Instructions] Before proceeding, let me mention that any forward-looking statements are based on the beliefs and assumptions of Fertilizantes Heringer management as well as on information currently available to the company. Forward-looking statements may involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should understand that events related to the macroeconomic environment, the industry and other factors may affect the company's future performance to differ materially from those expressed in such forward-looking statements. Now I would like to give the floor to the management to start the presentation. Please go ahead, [ Mr. Marcelo Ferry ].

Good morning. To begin our presentation, let's start talking about the company and our deliveries, our quarterly deliveries. We can see that there was a reduction in total volume of about 16.4%. And this was due to a delay of the markets where the company operates, particularly coffee, a delay in decision-making and purchasing of the product due to prices and the current environment and that postponed purchases to the last quarter of the year. This is also seen in the accumulated deliveries. So we have this postponement, particularly in coffee crop in -- from Q2 and Q3 to Q4 and also phosphate-based fertilizers given the high cost of this raw material in 2025, and this delayed the purchase decision-making, reflecting in a lower volume performed so far. When we look at the delivered product mix year-to-date, this reduction is concentrated in conventional products. But it is different in premium products, which are the most profitable ones for the company, which posted growth both in Q3 and in the 9 months of the year. In premium products, I'd like to emphasize that this brings more profitability to the company, and it reflects the focus on our strategy. When we look at raw materials since mid-2024 to now, we can see our prices of MAP, for example, until June, July. And then after that, pointing to a start decline in that. But when we move to potassium-based fertilizers, potassium chloride in red, we see much greater stability with increasing prices until June and now pointing to a slight decrease. This reinforces that postponement of purchase decision-making that we saw for nitrogen-based, the scenario oscillates a little more as has happened influenced by tenders and global procurement. And this is -- an example of this is urea. As for the global fertilizer scenario, here, we can see the 2025, 2026 crop year. In red, we have the total fertilizers market, very similar to what has happened in the last 2 years. So it's a linear scenario compared to the last 2 years. And as for planted areas and productivity, stable with a slight increase in planted area for this next cycle. So a relatively similar and optimistic scenario for this crop year that starts 2025, '26. Now I'll turn the floor to our CFO, Gustavo Oubinha, who will speak more about the financials.

Hello. Good morning, everyone. I will speak a little about how the market evaluation influences our numbers. We see that despite a reduction in volume, down 16%, both in Q3 and in the 9 months of 2025, in this case, year-to-date, close to 20%, we did not have a corresponding reduction in net revenue, which practically remained flat, both in Q3 '25 and in the 9 months of 2025. The main reason for that is related to the price of raw materials in the international market, which remained strong. There was actually a price increase, which offset the reduction in volume. In terms of gross result, we posted a result impacted by raw material price fluctuations. And in terms of G&A, we had a significant reduction of 57% reduction in administrative expenses of the company and 22% when we look at the year-to-date, 9 months '25. This is a trend that we expect will be maintained given some actions that the company has taken in that regard. And now moving to EBITDA. EBITDA remains negative, but already showing a sign of recovery. We had an EBITDA of approximately BRL 2.2 million compared to BRL 2 million negative EBITDA in Q3 2024. But when we look at the year-to-date, we had an EBITDA of BRL 75 million negative compared to BRL 110 million negative in the 9 months of 2024. So although we still have a negative EBITDA, we start seeing a sign of recovery and improvement influenced by market conditions and by actions taken by the company, as Marcelo mentioned, particularly when we think about the mix of products, focusing on premium products. In terms of net financial results, there was a positive foreign exchange variation compared to a negative result in the 9 months of 2024. So this time, foreign exchange variation is playing in our favor. And lastly, a net loss in Q3, but already with a positive net income in the 9 months, given the positive effect of foreign exchange variation. Moving to the next slide. Here, we bring you a chart showing the evolution of the exchange rate, which shows what I just mentioned. Foreign exchange variation of about 14% made the quarter ending with BRL 532 million positive exchange rate variation. And of course, that had a significant impact for the company. And other financial expenses, here, we are talking about the debt related to the court supervised reorganization. We ended up giving an expense of BRL 240 million in the 9 months of 2025. In terms of cash flow, in the 9 months of 2025, Heringer recorded cash equivalents of BRL 135 million above what we had in the previous quarter. The main items making up the variation in the period were positive result before income tax and social contribution of BRL 147 million, noncash revenues of BRL 241 million. We had a reduction in asset accounts amounting to BRL 230 million, mainly due to accounts receivable and inventory. Decrease of BRL 96 million in liability accounts, mainly composed of suppliers and net investment of BRL 23.7 million made up of works to adjust our units. So with that, we end the presentation. Thank you very much for joining, and we are here for the Q&A session to answer any questions you might have.

[Operator Instructions] As there are no questions, Fertilizantes Heringer's conference call has come to an end. Thank you very much. Have a good rest of the day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]