Vittia S.A. (VITT3.SA) Earnings Call Transcript & Summary

Good morning all. Welcome to the conference of the results from the third trimester of 2025 from Vittia. This is being recorded. The replay can be accessed on the site of the company where the presentation will be available for download. [Operator Instructions]. Before continuing, I will highlight the declarations that's based from Vittia and the available information for the company. These declarations can have uncertainties and risks related to future events. So it depends on circumstances that can or not happen. Investors, journalists, and analysts should take into consideration that events related to the events, macroeconomic can make the results to be materially different from those expressed on the declarations here provided. Wilson Romanini, CEO, presenter; Alexandre Del Frizzo, CFO; and Edgar Zanotto. Mr. Wilson will start the presentation. You can start now, Wilson.

First of all, good morning to all. We are going to present our results from the third trimester. Even though the great challenges that we've been facing at this moment in the Brazilian agro, even the global perspective, Vittia have been performing within criteria, trying to make the best possible to generate aggregate value to all that are involved into the business. So to speak a bit about the highlights from the third trimester, we have a generation of cash flow, which is very [ fundamental ] and there are disciplines or credits. And what we've been searching within the company, we had a growth, very interesting in soil of almost 33%. We closed the EBITDA from INR 33 million, 0.4% related to the 3Q, '24. Revenue grew also 5% and BRL 325 million. Our result was 12% superior from the same period as last year. We did all the process and we rebought again diversification of our company, it's out of the norm and also doing through JCP to our shareholders. Vittia Mexico, which is a project of ours that starts to have a commercialization at a small value from 2025, but it's very prospective -- very high prospective for 2026, registry that are active. We're in the process of keeping the biological products within 6 months period, we're going to have that on our shelves. We see that a project, that a winner a project. And at any moment, we're launching new products. We have a launch of Tricho-Turbo exclusive strain, a product that performs better than our previous product. To talk a bit about our performance. I spoke previously, we have an increments from our revenue. We should be seeing the results from other companies in the sector, but not a few companies from the sector are performing on the work that we've been doing. It was a very interesting performance less than we wanted, but within what's possible with the given time. With the year, we had a lot of challenges, the producer looking for rationality, trying to equalize their performance. We've been utilizing a mix of products that end up generating an aggregated values a bit smaller and consequently, group revenue. But Vittia has something very interesting because it's a company with a vast portfolio. On these difficult moments it's a company that's able to help the market what it's looking for. We've been saying that in a very assistive way. The rationalization of -- it started in September of 2023. We had our challenges in the agro business with 2021, '22 and then start things start to change. We understand a clear way that we had to go win inside our structure and to distribute better our expenses with greater efficiency. Another point is related to credit. Agro have been going through a tough time with taxes that have been very high interest rates. The leverage is very big on the sector. And within Vittia, we try to have a discipline, which is very intense in this credit scenario and it ends up being a cash flow more positive. When we talk about risks and opportunities, we live in a scenario very complex. I think that we can have great news for 2026. This is a very good feeling. My feeling particularly that it goes among the company, but the challenge is very big. So we're always working to try to do the best way possible and to believe in what we do. There was a non-definition very big by the producer. And when we get the farmers, when we get the 3 basis of line we saw everyone want to do a big correction with the biological part. Again, it has a growth. And again, when we get into fertilizers that are products that gives the relief that the farmer they want to feel a bit more. He wants to know if his crop will develop well or if it's really going to give what he wants -- what he's wishing. So he's going to have a work towards investment in this way. We live in an environment that is irregular, that the rain are very not -- it's different from last year and the previous one. So you guys have an idea I was talking in the region of 163 in Mato Grosso, we have a soy with 5 days and 5 already with 50 days. So you see the irregularity. You see the time of planting [ hurt ] over 40 days. We have opportunities working in an intense way related to innovation. We have the launching of Tricho. These products we're able to put in a lot of places in Brazil from next year, because of the performance, we're going to have a sale that is very interesting. We did the innovations on Boveria and Tricho-Turbo to bringing products with more efficiency. Talking about our positioning, the discipline, it's constant related to the credit work where every moment next to the farmer in a place that we never stopped investing. It was in the commercial network, bringing people that were trained with greater experience, trying to be next to the producer to look for new technologies and greater productivity. We have an evolution, constant evolution, like we said, on the solutions -- biological solutions, a lot of things that are being developed within our PDI. Like we said, we have a portfolio that is very complete. And in these moments -- at these times it helps us go through these moments and when things will change that will be better in the way that we imagine. The company will be very well prepared to shine in the scenario that's more favorable. So Frizzo, now it's your turn now.

Thank you, Wilson. Good morning to all. I'll go into the detail of the performances by line of business and the development of financial development, starting of the revenue liquid. We started very interesting on the fertilizer with a mix of factors helping with the performance to be positive, a line that had an impact -- positive impact on price. We had a greater demand because of technology of micro soil and a gain of market share, a combination of these 3 factors to have a greater performance on the trimester and accumulated throughout the year. So we go into this biological solutions and natural ones, we have a positive trimester. Not as we would like to, but we grew 12.6% a year on a small growth. We believe that the market is a level -- important level of delay and with more intensity on the foliage that we're going to speak later on, impacting on the biological solutions and natural ones that it performs better, mainly through the demand of this kind of technology and the launching of that we've been doing throughout the year that have been helping the performance of the line and we had a growth even though on a trimester that was delayed in a difficult year. On the Foliar -- Foliar fertilizer and industrial products we were a bit negative, started with rough year. We had a farmer that had a margin -- the narrow margin that is leaving the technology from Foliar for the last moment. So it means that there's a delay because that's important. But we don't know what are the intensity of the use of the technology in this scenario. Even though we think that the delay will recompose itself, but we don't know if the farmer, the producer with the technology and the intensity that they used in the last couple of years. And we've seen that with the diminishing of the technology related to risks. When we see under this line, we are seeing mix of worse mix related to the other years with a greater demand for older technologies consequently with a less value, which was aggregated. Now going to the next slide. As a result, the gross profit and gross margin by segment, Micro soil performed better than the other ones, from 32% from 28%. But when we look each of these lines, we see that the scenario is challenging for all the lines. For fertilizer -- soil fertilizer, we had a stability, but the margin was straight margin, narrower margin, it's characteristic from that line. But the other lines. We had a little bit of loss from the margin that we consider positive in a way given the scenario of this year. So a very tough year with some technologies with this pressure towards price, and we've been working in the parts of cost reduction to try to deal we're not able to gain on the commercial part. Going to the next slide now. And related to the selling, general and administrative expenses, we see that we go in the strategy to search for efficiency, trying to be able to deliver a performance within what is expected, because it's easier, which is to be completely under our control. The important thing to comment that this trimester there was a factor extraordinary that impacts as a whole generated some just lines and the Minas of -- Patos de Minas of organic, it was a project. It's a project that we believed that we ended up having some delays on this project related to the market and also related to integration of this technology within the group. And we weren't able to have the performance that we wanted, but we understand that in the short term, we were not able to revert to this scenario to go back on this and this technology in this unit from our place from Patos de Minas and we ended up ending in Patos de Minas to focus on the lines that were promised that we have within the company. And to end this part in Patos de Minas on a point of view that we had a land that was rented that we did some good things and we know when, and we were able to go back that again to get that back. So -- and regular expenses like people, transportation, what we had to dismantle to bring to our branch in Serrana of our mineral organic. Remember that is still on our portfolio, but now it's focused on our technology. Historically that it's based on Turbo with Patos de Minas were used to use the cow bed. We still keep the portfolio of organic mineral, but it's more focused on our original technology. And of course, less investments and focus what we had when we started this project that was through the acquisition of the company of Vitoria Fertilizers. And not considering these factors, we had a SG&A a little bit lower than the same period from last year. And throughout the year, they were a bit lower, but it's not what we wait for the end of the year. We had a factor of this reversal. If we won this factor, we had a small growth on the trimester and probably performance a stable performance. But today, we comment we don't have -- we no longer have the strategy -- reduction strategy of expenses and structure like we had beginning in October, November of 2023, and along throughout the year of 2024 that resulted in some economies in the last trimesters, so the expectancy now and our strategy is to have things very controlled with reductions. Now related to this -- to the economy. We're able to keep this EBITDA very close. Even related to growth that had a small margin, we had a small loss couple of percentages. So related to CapEx, we don't have no news. Our strategy was to invest with smaller investments to focus on efficiency, operational efficiency. We're able to fulfill this strategy. We're performing lower than last year, 7.7% smaller. The only investment that was more expressive was on the plants of -- defensive of typical differences pesticides. We did a BRL 4.2 million of a total of BRL 7.3 million planned for 2025. We're able to adjust the estimate, it was BRL 10 million to. So we focused on the part of efficiency, operational efficiency that a greater compensation related to cost. And here's the highlights -- positive highlights. We've been performing the last trimesters, the cash flow management and our financial discipline. We had a cash flow -- generation of cash flow positive on the trimester in this year with a growth -- relevant growth related to the same period of last year based on our discipline related to credit concession and the injection of cash flow. The agro is a lot challenging related to the aspect of credit and this work is not the results of the year, it's a result of our management within the cycle of a couple of years. We don't make this happen from day to night from day to the other when we Now we were harvesting the crops from the periods with greatest euphoria, a level that is very controlled of. Consequently with a leverage, very controlled leverage, and we closed the 9 months from 2025 with 0.9 with dividends, even considering payment of a buyback program over BRL 40 million. We see very conservative in this scenario, and we're taking benefits with a cheap credit, and we're able to get even cheaper considering to the previous years. We understand that the company has a position that is privileged in this market, which is a point of view to capitalization, and we are very calm related to that aspect. We're able to keep our plans and our strategic commercial strategy without having to do any kind of adjustments or a matter of -- it's been very like you guys know this agro has been going through a rough time, related to distribution and company also related to liquidity. The financial results, the performance was slightly greater than last year. The main factor here was the AVP that goes into the financial results with the capital cost going up and then automatically goes up in comparison to the annual results. And IR and social contribution factor that's more seasonal. It's much more superior than last year that we recognize the JCP. We had the declaration of 2 JCPs intermediate ones on the third trimester of 2025. The counterpart comparing to 2024 when we declared all JCP only on the fourth trimester -- the fourth quarter. So we equalize the fiscal results from the years will be similar right now that we have a performance that is substantially better. Last with the net profit and net margin, we had on the quarter, a result that was adjusted for demobilization, the results that are usually greater than the previous trimester from 2024 and accumulated throughout the year. We have a result that is mainly stable. Now Edgar will speak to the launching of the Tricho-Turbo and the innovation part.

Good morning, everyone. Thank you for being here to seeing our life. Like we said and keep on talking that the last slide that we had the results, that this year we had some bit more products related to have a better portfolio. So products that have to substitute things that have been going on. The launching that we had recent was the Tricho-Turbo OD, which is a fungicide. It's a bit more stronger. We have a greater capacity of manufacture and productive capacity, a greater one. We have better protection. The formulation, the quality is differentiated better. It's one more product -- we have the Meta-Turbo Max and Boveria-Turbo WP recently. Now we have the launch of Tricho-Turbo OD, completing 4 launches this year, counting with Triunfe, which is the greatest launch of the year. Can you go to the next slide, please. The investments that we have in our innovations, they're still very stable. We're not cutting investments in this line in this part. When we see reduction, it's related to CapEx when we did the investments on the previous years, and it's now a matter of reduction. There's no necessity for the CapEx now and the investments in biological products for new technologies in fertilizer, we're keeping the same level of investments. We completed 4 new registries this year, another product that we're able to more recommendations from biological parts with these registries of new products that we're able to use all the cultures that we start to aggregate new recommendations to use it and something that's very important to say it's Mexico. Mexico, we have 12 products registered there. We started commercialization active on there, and we have a great expectancy there with a lot of good partnerships in the next year, 2026. So this is it.

Thank you very much, Edgar. Talking about a point of view of the market, capital market, stock market, starting we're still suffering on the prospective, strong related to the agro business with our stock market are still not performing within our expectancy with the gap closed. So because of that, we're still active in the rebuying program. We have a BRL 13.4 million that we bought again. We had the end of the fourth program with the canceling of 3 million stock market that were in the treasury -- 3 million shares held in treasury and were for a fifth share buyback program, number of shares to be acquired up to BRL 4.5 million. We're still going to be keeping within the strategy that we've been commenting in the last quarters to take advantage of these opportunities, but always in a gradual way. So the buyback program is another strategy that we wanted to do. But given this difference between the value of our shares, we felt the obligation to do these investments end up being the best allocation with the shares within the base, but always doing in a gradual way without having to have any kind of impact in terms of prices, diversification of markets. Now we believe we can start the Q&A.

[Operator Instructions] Our first question comes from Pedro Fonseca from XP.

Wilson, Frizzo, Edgar, 2 points that I'd like to explore with you guys. First, to the evolution of the shares of the sector, the wallet impacting the whole sector with the delay. So I'd like to do how you guys see all this evolution throughout the Q4. And particularly, I'd like to listen to the use related to the Foliar use, the line of business that maybe a bit more behind, but that's the first point. The second point is, I'd like to listen from you guys, how you guys are seeing the condition, financial condition and health related to the farmers and producers. In a great bank there has a great exposition to the agro and is reporting a greater loss with the players from -- without or with the faults -- without the brokerage of the harvest, if you guys think with those players with the inputs, if the worst has passed already or if this has been moments to be cautious. Maybe even cannot be so aggressive growth of number of clients, et cetera. So this is an exit point.

Good morning, Pedro. I'll start here. I'll highlight. If Frizzo wants to highlight something that's interesting. So the matter of the evolution we have now a Huawei portfolio that is bigger compared to last year. And some matters that there has to be evaluated, they will depend on the rain, the stabilization. But it's a firm portfolio, so that's something -- that's what I can say. It's robust enough. Now market, it's the market. This year, we think in a way, next year, we think in a different way. The person that puts things from the world into his life is completely wrong. So things that we're doing today, this moment, we're going to do different tomorrow. So the portfolio, it's a greater portfolio than the same period of last year. Related to Foliar, as I spoken previously, we had a year that was very interesting in the sale of the soil-related products, fertilizers, soil fertilizers. I think this is in a point that we have a competition, very big competition. We have good partners. In this way, the producer, farmer did this investment. Now this is something that's rising, this is perception of this technology. Looking for this greater productivity and of course, we end up getting some things related to the work. So I have no doubt about that. So when we speak about the fertilizers -- Foliar fertilizers. What does the producer, the farmers think. We want to see, like I said in the previous year, you get Mato Grosso 163. We see soy is sprouted with 5 and 50 days. So what is it the producer think in the farm in a more complex situation, being more rationalized -- rational possible the spraying in the right moment. You'll see if his crop or his harvest that they will need, if the rain will fall, we have a good formation, and he will do. What can he do is to exchange the mix in terms of technology. I talk about Foliar fertilizers specialties, you see effectively a lot of ways, sulfates, nitrates, we see all the products about the concentrated suspensions and carbonates. And automatically, the producer, the farmers is migrating to products with less value -- aggregated value. But we understand that the markets have a normalization related to the climate, will consume. We consume that I have no doubt about that. We expect to see a great expectancy to reach December 30 with a number that is so interesting related to this line. Now we are searching for going to other markets, other cultures, so we can perform in a more interesting way. And you asked already, you also asked it so this related to the bank. It didn't end. What you said about the bank. It's not over yet. There's a lot of challenges upfront. The leverage is very big. The interest rates are out there. People are listening all the time. There's not expectancy that a fall of the interest rates drop. And there's a lot of things to go on before we can reach a proper conclusion. So this is our understanding. The market is very dynamic. When you hear I'm over 30 years in the agro business, we have never seen a process that is very related to difficulty, but things change, and I think it will change. It's a matter of diminishing -- the lowering of the productivity in Brazil, will be delayed related to the planting of soy. We're going to have a smaller area related to corn, the global consumption of protein is getting higher day by day. We see all the evaluations that we're going to be producing. It's not going to be in the same level of stock compared to next year. So, good news. Welcome. So very conservative, that's why we're presenting the results. It's not what we wanted, but we're showing results. I think it's very within our conservative way.

Thank you, Wilson. Thank you for going into the answer.

Just making sure so you believe that we're able to have a reduction of area, correct? I think we will have it because we're having the soy planting very delayed last year. We have a client regimen very satisfactory. And even this window was very ideal for the planting of the corn, and we got out of this window, this ideal window in some regions already. So we understand the producer that will put all the stain -- the products will be -- will use product with less potential, so we will have a less production of the harvesting. So I have no doubt about that.

Our next question comes from [indiscernible].

Frizzo, on the previous comments, they had happened with the frequency, this appetite a little less related to this macro it's more challenging, I hear some commentary from other parts of the sector. And this question related to diversification showed with more frequent numbers. In other forms also I'd like to understand if, in fact, it's the greatest bothering. How do you compare this dynamic of mix with this medium price on the same base. If I'm not mistaken, I had less area to go with a smaller price. I'd like to understand if this is kept for the moment. What do you guys think that you have space to happen in the diversification in 2026. And related to margin, and this is commented that there was this important change, getting more share in soil related to Foliar use. But also this dynamic of margin compression in the unities and the building branches individually Q4 2026. We have the expectancy that we have a return of the Foliar that we understand that mix be beneficial points of Q4. The question is to how you compare from now on this mix that can do better with this environment that's a bit weaker with margins. How to compare these 2 factors with the Foliar being heavier than a [ 4 ].

Okay. So I'll start with you complement. So at the end, [ Bruno ], yes, we are waiting on the fourth quarter of last year, the beginning of next year. We have a better performance on Foliar parts and this acceleration of the soil -- agro soil it's for planting. So we cannot expect that to keep the same demand at the end of the year and at the beginning of the next year. So we wait this renewal. We have a certain difficulty to understand what will be the level of demand, even though the renewal of this delayed operation with the cost cutting, a reduction of rentability that is waiting for this harvesting. Producers is doing something very similar, they have a small revenue, so we have to have a smaller cost. Of course, in this case, there's a little bit more complex. Sometimes you have a smaller cost and smaller productivity. So these things are linked. So it's very challenging. Now we've been seeing this kind of behavior. So I think more of resources and productivity this year. So this is the behavior of the dynamic for the harvest. But with the delay, yes, we wait for this mix on the fourth quarter and the first quarter of next year, that's part of the harvesting 2025-'26. So in 2026 we're going to have this price drop -- in 2023, '24, the substantial price drops, but we see an environment that is very challenging. We see some -- we still see some kind of price drops and we've seen some stability. So this is a point of view of the industries related to imports that we see something getting out of the market and environment that is normalizing. And related to the inputs, we haven't seen companies getting out of the market. We see a lot of companies going in the market, so level of reduction of instability, drastic one. We see a lot of companies that are facing challenges -- financial challenges related to the scenario. So it's natural if this scenario if it become -- if it persists this challenging scenario. So the price can always drop more. We can't say that it won't. But like I said, without any doubts related to price, the worst has passed already. That's our vision and for someone to complement. I think you're very complete on your answer. That's the feeling that we have here.