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

Good morning. Thank you for waiting. Welcome to Fertilizantes Heringer conference call to discuss second quarter 2026 earnings results. With us today is Mr. Fernando Maeda, CFO and IRO. 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 the company's management as well as on information currently available to the company. Forward-looking statements may involve risks and uncertainties as they refer to future events and, therefore, depend on circumstances, which may or may not occur. Investors, analysts and journalists should bear in mind that events related to the macroeconomic environment, the industry and other factors may cause actual results to differ materially from those expressed in such forward-looking statements. Now I would like to give the floor to Mr. Maeda, who will begin the presentation. Mr. Maeda, please go ahead.

Good morning. We'll start with the quarterly results for Q2 '26. As regards to quarterly deliveries, in Q2 '26, total volume delivered was 103,000 metric tonnes, down 62.4% from 274,000 metric tonnes reported in Q2 '25. This reflects mainly the lower amount of units or plants in operation compared to the same period. All crops showed a volume retraction in the year-to-year comparison. As for mix, soybean and coffee increased their participation in the deliveries while sugarcane and other products reduced their representation. Now moving to cumulative deliveries. In the first 6 months of '26, total volume delivered was 305,000 metric tonnes, a 51.5% reduction compared to the first half of '25. And just like seen in the quarter, volume reduction is related to a lower number of plants in operation. In the delivery mix, coffee accounts for 32% of the total volume sold in the half year, while corn accounted for 31%. Sugarcane and other crops reduced their share compared to the same period last year. As for the mix of product delivery, we can see volumes decreased both for conventional fertilizers and for premium products. In the second quarter, conventional and premium recorded 80,000 and 23,000 tonnes. In the half year, delivered 240,000 tonnes for conventional products and 93,000 [indiscernible] products. The relative share of both products remained practically stable compared to the previous year with a predominance of conventional products. And now moving to the financial performance. Net revenue totaled BRL 316.5 million in Q2 and BRL 841.8 million in the half year, primarily due to the lower sales volume compared to the same period last year. Gross profit was positive at BRL 16.7 million compared to a gross loss of BRL 19.2 million in Q2 '25. In the half year, gross profit was positive at BRL 20.4 million compared to BRL 27.2 million positive in the first half of '25. EBITDA remained negative at BRL 3.4 million and negative by BRL 7.5 million in the half year. Although there is an improvement, the company still posted a negative operating margin in the periods reported. Net income was a net loss of BRL 37.2 million and negative at BRL 22.6 million. And this was impacted mainly by the financial results, especially given the lower -- the weaker appreciation of the Brazilian real against the U.S. dollar in the period. Now let's look specifically at the financial results. The main difference compared to the comparative period is related to the exchange rate variation. In 2025, the BRL appreciated compared to the U.S. dollars. In 2026, this effect was -- had a less significant positive exchange rate impact on foreign currency liabilities. So net income was lower. Now speaking about cash flow. In the first half of '26, Heringer ended the period with cash and cash equivalents totaling BRL 89.7 million. The main items contributing to this were reduction in inventories, accounts receivable, partially offset by trade receivables and early purchases by customers. Net investments totaled BRL 5.7 million for construction work to upgrade facilities and other investments in maintenance. Now moving to the next slide about price performance of our raw materials. Regarding the main inputs used in the fertilizers industry, we can see different behaviors along the quarter. Urea showed a price reduction during Q2, which brought prices back to historical average levels, while the prices for MAP and potassium chloride remained high under pressure compared to the beginning of last year. This scenario continued to be influenced by geopolitical tensions, mainly the wars involving the Strait of Hormuz and some restrictions in global supply chains. Talking about domestic grain production. According to CONAB's survey for the 2025-'26 crop year, planted area is expected to exceed 83 million hectares. Total production of grain is estimated at 360.1 million tonnes or 2.2% higher than what was recorded in the previous crop year. And the estimate of fertilizers consumption considers a reduction of 1.9 million tonnes according to CONAB's survey. The numbers show the continuity of the expansion of Brazilian agriculture according to projections currently disclosed by CONAB, the reduction in the volume of fertilizers consumption. Well, then I think that to conclude, Q2 and first half of '26 were marked by lower volumes compared to the comparative periods in 2025, reflecting the operational base of the company and volumes reduction directly impacted net income -- net revenue for the period. Although some operational metrics improved, the company reported a negative EBITDA and net income, both for the quarter and the first 6 months of the year. With this, I would like to end the presentation. We can open for questions.

[Operator Instructions] If there are no questions, the Fertilizantes Heringer earnings conference call is closed. Thank you very much, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]