Verde AgriTech Limited (NPK) Earnings Call Transcript & Summary

I've been waiting for this day for 2.5 years. Every once in a while, a new product comes along that change everything. Verde has been very fortunate to have done so with K Forte. K Forte, which was launched very recently, is one of the fastest-growing products for sustainable agriculture. We already achieved over 900 farmers using the product. The product is being used in over 300,000 hectares, which is an area 50x greater than Manhattan. But more importantly is how much chloride we save soils from. It's about 50,000 tonnes of chloride. Every kilogram of potassium chloride you apply to soils is equivalent to about 8 liters of bleach, Clorox, as far as killing soil microorganisms. So it's been nearly 0.5 billion liters of bleach we saved the soils from since we began our journey. Until recently, this meant nothing. Until recently, no one really cared about the fact that in one hand of soil, you have over 10 billion different microorganisms. This is starting to change. And we can see that in a documentary launched by Netflix not long ago, which I strongly recommend everyone to watch, where it highlights the importance microorganisms have in addressing climate change. Only this month, the United Nations, the Food and Agricultural Organization, published a paper, which is a recommendation, a policy recommendation for governments where it highlights the importance of soil microorganisms, soil biodiversity. And it's just hard to reconcile what is used nowadays in terms of potassium chloride, the damage it has on soil microorganisms where science is taking us. Until very recently, no one would believe that all countries would go and say they're going to be carbon neutral or would be banning fossil fuels by a given date. So I also don't think it's too farfetched to say that we should looking for a world which will at some point in the future, hope not so distant, be able also to declare itself chloride-free, to be able to declare its soils being chloride-free. Well, we here to talk about a new technology. We're here to talk today about a new product. And we've been fortunate to create a new one which again will change everything. This new product is called BAKS. BAKS is a combination of K Forte and any other 3 fertilizers. We will allow farmers, researchers to decide how and which one of those nutrients to incorporate into the product. The reason it is such a transformational product is because farmers are always looking for ways to optimize how they cultivate, how they farm their properties. And by being able to add those other nutrients, we can give farmers flexibility to incorporate nutrients to the product, which will no longer require them to keep coming back to the fields in successive applications to apply other nutrients. But more than that, over those years, we had several farmers coming to us and complaining about how we could be doing that because they wanted to be able to buy all nutrients. They wanted to be able to buy all fertilizers from Verde rather than buying just potassium from Verde and other nutrients from other companies. So I'm very pleased that now we're going to be able to do that with all the different nutrients for them. But in order to make BAKS a reality, the way we wanted it to be, we had to develop a new technology. This new technology is called 3D Alliance, and it allows us to amalgamate K Forte with those other nutrients, creating new materials, creating a new bond between those different nutrients. I'm also happy to say that this new technology, 3D Alliance, production of BAKS is already a reality. We've already built the plant that allows Verde to produce BAKS. It's operational, and we hope to start delivering BAKS as early as Q1 next year. As part of this process in developing BAKS, in developing 3D Alliance, we obviously spoke a lot to customers, we obviously spoke a lot to researchers. And one of those exercises was really try to question which would be the main nutrient farmers would want to see incorporated. And on the top of the list, the nutrient was sulfur. Pretty much every single consultant, professor, farmer asked us to find a way to incorporate sulfur to K Forte, creating BAKS. So we're very happy we did so. And the reason sulfur is so important is -- well, starting from an agronomic point of view, you have 6 essential micronutrients. Those are nitrogen, phosphate, potash, calcium, magnesium and sulfur. Crops won't grow and develop to its full potential if there is a limitation of sulfur. Especially in Brazil, soil is very poor in sulfur, so you needed to be reapplying it every year. It's a market -- only for agriculture, it's globally worth $4 billion, expected to get to about $6 billion. And the reason farmers are currently so frustrated with the alternatives they have in the marketplace for providing sulfur has to do with 2 problems they face from the conventional sulfur sources. The first problem is nutrient availability or nutrient performance, deficiency of those sources of sulfur. They can either go one route, which delivers sulfur as sulfate. In which case, for Brazilian tropical very wetted soils, it means that a lot of that sulfur is leached away. And it means that in the process of that sulfur or that sulfate being leached away, it carries other important nutrients for crop. So it carries nutrients like magnesium, which I've also just said how magnesium is another essential micronutrient. And thus, when you apply that as sulfate, you make it a favorable environment to leach the sulfate, especially when you apply sulfur from gypsum, which is a widely used source of sulfur as well. But even if you -- when you apply it from sulfate from other fertilizers, this phenomenon will happen. The other problem that farmers face in terms of the usage of sulfur, and that comes especially when they try to use alternatives to the highly soluble sulfur sources, is the fact that if they apply it as elemental sulfur, as granulated elemental sulfur, the release is most often too slow. The release most often isn't fast enough to fulfill all the growth potential a crop needs. So those, on its own, would be 2 major problems. But the other problem they have is the cost. The cost of sulfur when you acquire it from fertilizers such as super simple phosphate or you buy it from fertilizers such as ammonium sulfate, the cost is very high. And it's very high because if they look at, for example, phosphate, instead of buying phosphate from super simple phosphate, which comes with sulfur, they could be buying phosphate from a fertilizer such as super triple phosphate, or MAP, where the cost of the nutrient on a point basis, on a percentage basis works out much cheaper than when they buy it from super simple phosphate. The same thing is true when you look another source of phosphate, which is ammonium sulfate. They could be buying urea, which is cheaper on a nutrient basis, instead of buying it from ammonium sulfate. So those were the 3 problems. I guess that's why everyone wanted a different source. And that's why we went back to work on it. Sulfur, though, is a tricky element. So we had to develop a new technology to be able to incorporate sulfur into BAKS. And this new technology, which we equally launched today, is called Micro S, which allows us to convert unrefined elemental sulfur, widely available, residue even of some sort of industries, and process that into a highly efficient micronized version of sulfur, which ticks all the box farmers have been complaining about. So the availability for Brazilian tropical soils is ideal with the gradual release. The soil distribution is phenomenal in terms of the application of it associated with BAKS. And also very important for farmers, it's a very cost efficient source of the nutrient. So we're happy to be able to incorporate Micro S technology with our BAKS product and be able to provide this combination of nutrients. As a matter of fact, we're so excited about this -- the transformational nature of those technologies we developed in the last years that we will look back and we'll be working on a new feasibility study to explore and put a value on the potential of this new opportunity. We hope to be able to present this feasibility study by the end of 2021. And because it's such a phenomenal product, really, and so cost efficient for farmers that we will go beyond what we did before. We will go beyond what we did in terms of offering potassium chloride from the previous prefeasibility study we did. All I'm trying to say is that we are going to be looking at reaching a much higher market penetration in Brazil with BAKS. We're going to be looking at a market penetration of anything between 60% and 80% of the Brazilian market for both potash and sulfur. So this is something else we're going to be looking -- we're going to be working in 2021 with a view of presenting before Christmas next year. Thank you very much for participating on the launch of BAKS, on the launch of Micro S Technology, on the launch of 3D Alliance. We are very excited about 2021 and the years beyond. If you haven't subscribed to our YouTube channel yet, please do so. Please make sure you register to receive our newsletter so you can keep up to date with all of our developments. And as always, if you have any questions, please share, please send it, and we'll be more than happy to answer any questions. So thank you very much. A very happy Christmas to you and your family, and an excellent 2021 for us all. Thank you a lot.