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

Good morning, everyone. Welcome to the videoconference for the presentation of the fourth quarter results of 2024 from Vittia. We are being recorded, and the replay may be accessed on the website of the company where the presentation will also be available for download. [Operator Instructions] Before beginning, I would like to reinforce that the prospective declarations are based on the creed and suppositions of Vittia and the current information available for the company. These declarations may involve risks and uncertainties, considering that they are regarding future aspects, so they depend on circumstances that may or may not happen. Investors, analysts and journalists should consider that environments connected to the macroeconomic events and other effects may differ our results from what they have been expected in our declarations. We have here Mr. Wilson Romanini, CEO; Alexandre Del Nero Frizzo, CFO and [indiscernible] Director. And now, I would like to pass the floor to Wilson Romanini that will begin the presentation. Wilson, you have the floor.

Thank you, Lais. Good morning, everyone. Thank you for being here with us. We will now talk about the fourth quarter of the company, the closure of 2024. And I believe it is aligned with what we have been passing to you. All the work that Vittia had to do in 2024 and certainly we will do in 2025 has been showing the way that we work, the responsibility that we have. So talking about our gross revenue, we are in the biological segment. We have reached BRL 95.7 million, 22.5% more than the previous year; and BRL 249.3 million, 0.4% more than 2023. And our line of biological defensives has registered BRL 76 million, 38% -- almost 40% more than the fourth quarter of 2023; and BRL 191.7 million for the whole year, which is 16.1% more than 2023. The net revenue amounted BRL 255.8 million, 5.1% more than the fourth quarter of 2023; and BRL 786.6 million throughout 2024, 4% more than 2023. The net income totaled BRL 46.4 million, 12.4% more than '23; and BRL 76.3 million (sic) [ BRL 75.3 million ] for the whole year, which is minus 22.6% when comparing to 2023. We have been observing the issues that have been happening on the environment. The EBITDA has adjusted itself and totaled BRL 61.3 million, 36.9% more than the quarter of '23; and BRL 133.3 million, minus 6% when comparing to 2023. The CapEx totaled BRL 6.2 million for the quarter, almost minus 50% for 2023; and BRL 32.8 million in 2024, which is minus 34.7% [ in ] 2023. Talking about the performance of the whole year, you have noticed that despite having a challenging year, we had a growth in our revenue. We have been talking to you in an emphatical manner about the rationalization on our expenses. So we were aligned with our SG&A, which has allowed for us to improve our results. We know the agro. We have been there for more than 30 years, and we know that this is a market that has its variations. We always try to leave the company in the level that is comfortable. So we have a comfort in this sense. And in our fourth quarter was a moment that the rains came. There was a recovery in the prices of the commodities. It's important for us to emphasize that commodities have reached the prices that we were hoping for. In the next months, corn will come in a favorable position for the recovery of prices. We understand that 2025 has major challenges, but effectively, it comes healthier and with a more comfortable work environment. It is still a year with many challenges. We are concerned with the credit. Credit has [ become ] more expensive. The [ hindrance ] of legal recovery continues. Vittia has an interesting criteria for credit concession. We have a good protection in this regard, but the market is the market. And apart from that, truly, we try to understand it. There is a persistence from the producer side in having a more fractioned purchase, thinking about it better, also seeking an efficiency for their activities. And we have [ fundamentals ] that are more favorable for this market of inputs. There is a stabilization of prices for the inputs. We have a stock, and this is within the recovery of 2024. We have a more adjusted stock, and this will propel companies to have an easier market, if I may say so, for 2025. Our position is firm when talking about our financial solidity. As I said to you, [ gross ] rationalization is to understand really well where we will put our resources. We still have this thesis of a low leverage. We have always sought to strengthen our commercial partners, be it in resale, cooperatives. This is a daily focus of our company. And we are here working, and this is today's world, and we want to make things better for tomorrow. And so, we are working in R&DI with new products in the biological area. Now, I will pass the floor to Frizzo, as he will talk to you about our numbers.

Thank you, Wilson. Good morning, everyone. Entering on our financial performance, we had a year that was challenging. However, we were still able to close the year with a growth in 4 of our business lines. The fourth quarter gave us a better performance in the area of biopesticides. We had a drought period in the beginning of the crop that ended up slowing down the demand for the biopesticides in the third quarter. And in the fourth quarter, it came strongly, as we were hoping for. And talking about foliar fertilizers, which is a more planned purchase, we had a fourth quarter with a slight drop. However, given the performance that we had in the previous quarters -- semesters, we still finished the year with an interesting closure, given the scenario. Inoculants gave us an atypical year, a year in which we observed a scenario that was complex under the standpoint of competition, remembering here that this line has a preponderance of inoculants for soy. And as we had a market that was delayed in the plantation of soy, we ended up facing an adverse competitive space. And we have observed that throughout the year, due to this delay, we noticed a diminishing in the use of inoculants. For many years, we had been growing with the dosage per hectare. And last year, I believe that due to this atypical plantation, we understand that there was a smaller market for inoculants. For organominerals, we are not focusing on growth. We are focusing on finishing the operations. This drop is natural. And the soil conditioners, as the foliars had a drop on the third quarter, but in the accumulated of the year, we had a growth. And the industrial products, we also had a growth, but it ends up not being the focus of the company. And this growth is more a recovery on the level of sales that we had. At one point, we were able to sell BRL 70 million in 2022. So even though it grew a lot, there is still not such a good performance when comparing to what we had once. Under the standpoint of our margin, we had a year with a pressure on the prices in all of our lines, in all inputs. So we ended up having a year with a drop in almost all of our lines. The soil conditioners, organominerals, micronutrients, we had a better result, and we perhaps diminished this drop a little bit. But in the other lines, we had a slight drop in our margins. Given this scenario in the Brazilian agro, with many adjustments and pressures -- I'm talking about prices -- in the fourth quarter, we ended up having a seasonality and changes in the mix. We even had some varied behaviors for foliar fertilizers and industrial products. We had an increase in our margin comparing to the same quarters of different years as well as biological products, and the soil micronutrients had a drop. But despite this increase in the margin, we understand that these are more seasonal factors, and we still have not seen a price recovery and margin recovery throughout the year. We spent the year with a drop in prices. I believe that in the last quarter, we began to see a stabilization in prices. But it's still not a recovery in and of itself. And going to the next slide, under the standpoint of SG&A, we fulfilled our objective, understanding the challenging scenario that we would face in 2024. From the end of 2023, we had this directioning to seek more efficiency without obviously dismounting our structures, which will support our growth in a long term. We see -- we have been seeking where we would be able to reduce our expenses so as to be more efficient where the market was not demanding. And so, it would not make sense for us to attack the market, if we may say so. So, that is why most of our reduction came on expenses with sales. We were selective in expenses regarding stimulus for sales. And we closed the year with a growth of around 1% on our SG&A. And it's worth to highlight that our PDD, despite having gone beyond a reversion of provision to a provision, this was still really small. It was BRL 258,000. We had only just one event. That was even compensated by some credit recoveries that we had throughout the year. So we closed the year with a level of nonpayment that was really low. Going for the next slide, with this result on this scenario that despite having had a slight increase on the revenue and a small margin drop and controlled expenses, we were able to hold the drop of EBITDA. Obviously, the drop of EBITDA is not on our objective, but within this scenario that we had throughout the year, this was a slight drop and much lower than the one we had in 2023, which was of more than 30%. So we were able to reach our objectives on top of a challenging scenario that we were facing. On the next slide, talking about our CapEx, this was a challenging year. We reduced our investment in CapEx, not only due to this challenging year, but due to the fact that we closed our investment cycle in our new plant. Well, actually, it's not that new right now, but our biologicals plant that resulted in a higher CapEx on the past years, now we just had an investment of BRL 8.2 million in this plant to seek some efficiency gains in the biological plants, but now we are with an interesting capacity. So we don't see major investments happening in the short term. Investments should be connected to efficiency gains, improvements in our processes. The other 2 investments that are highlighted here under the standpoint that is -- I mean, they are not as financially relevant, but from a strategic standpoint, we have finalized the transfer of our headquarters to the administrative office in Ribeirao Preto in the interior of Sao Paulo, which is important for us to reduce our retention of resources. Some areas have occupied spaces here in Ribeirao, and we have used strategically this office. And also, our microbiological plants, which was finalized in 2024, the year of the ramp-up, and we hope that in 2025, we will see the fruits of this new plant, having an entire year with this plant operating. Okay. For the next one, talking about the cash flow, we had a challenging year. However, it was understandable. We know that the market is facing credit issues and liquidity. So our payments -- due payments had a drop. Producers end up seeking more time to pay, but we understand that this is normal in every business. There are years in which we have more or less liquidity. So it doesn't concern us as it is in our history. What would be concerning is, if we had nonpayment, which is not the case. So due to this slight worsening in our capital, we had a variation that was smaller than last year. However -- but this is still really healthy. We closed with an EBITDA net debt adjusted into 1.1. And I'd like to mention that we had a distribution, a return for the stockholders that was really advantageous in 2024, in which we gave back BRL 80 million between the repurchase plan and the distribution that was made through JCP. If we had chosen -- it was our decision of allocating this capital in the repurchase and JCP. But if we had BRL 80 million in our cash, it would -- we would have a smaller net debt. And entering on the fiscal area and financial area, we had a better financial result in 2024. It's worth to highlight here a change in our practice. In 2023, we had allocated around BRL 4.2 million of our tax income in our financial result. It was a historic practice, but we understood that this was not the most adequate one. So we removed this tax from the JCP, from the financial result and reallocated it into the [ RP and social control ]. However, even though we do not consider this result, we had a financial expense that was lower than 2023 due to a net debt smaller than the past year and also a rate of interest throughout the year that was smaller than 2023. Of course, we all know that this rate is increasing. However, our cost of capitation for 2024 was smaller than 2023. And when talking about the fiscal area, as was hoped for, we had a relevant increase on the fiscal charge throughout the year, when comparing the high -- it was BRL 21 million, the margin of social contribution, this -- due to the end of subvention. This was approved in the end of 2023 by the end -- on the change of the legislation that would allow for not having subvention on income tax and social contribution. So this was already hoped for, and it had a negative impact in 2024, making us have a more relevant drop in our profitability than our operational drop and financial drop. Now, I will pass the floor to Edgar, so he can mention our evolutions in innovation.

Thank you, Frizzo. Good morning, everyone. Thank you for being here. We'll talk about our constant investment in R&DI. We continue to focus on the biologicals market. Most of our investments were capped despite having had a difficult year. We have practically the same levels. We have a slight variation of 4.6% more in the quarter, 1.1% for the year. So we have been trying to work and not cut anything from this investment segment as we understand that this is what we bring in our future. So we had a lot of gains throughout the year, 13 new recommendations. We have 14 special registries that we had obtained in 2024. Five are with micronutrients that no one is working right now. We have more innovative things. And 9 are new formulations. Some of them will be available soon in our line. They are faster. The innovative microorganisms take a while. And perhaps people will begin to see our communication, which is the launch of Triunfe. We are in a market with more than BRL 3 million, which is practically the size of the entire market with a multi-site based on minerals for controlling diseases. And we will begin to work on this, and we understand we have a space to work on this year with disclosure and access to the market, performing good businesses. So let's go for the next slide, please. In market development, we are still focused on our product line, specifically on biological products. We have been growing our BioVittia work, focused on some areas. This is a project to show that biologicals work. We can handle this with 100% of biological defensives without having chemicals. It's not our objective to make everyone organic, but to show that this technology works and biological defensives work, the biopesticides work despite being biological. We have more than 82 fields. And we'd bought a summary of what we have, an increment in productivities in each one of our crops. Despite having a similar cost, we had an increase in productivity when we use that, as it doesn't have the collateral effect. Something that is interesting, for any biopesticide, you bring a collateral effect for plants. When you use a biological one, you increase the productivity and you stress the plants too. We had talked about, at the end of the year, in our call, we practically had a spin-off of the BioVittia product, which is the Grão de Vittia, Vittia grain. And we learned with BioVittia, and we were able to understand that coffee, we are easier to have a 100% biological crop, and we are taking this as a proposition of management to producers, and we have been working with excellent distributions, major coffee cooperatives. And we're now taking this to producers. We have 22 fields like this. We have a major volume, and is in 3 Brazilian states. This is an area of 133 hectares. And we're trying to develop this market, remembering that we have major producers that have already reverted their production to do it 100% biologically after they saw those fields. So it's a little bit different. The other one is more for communication. However, the Grão de Vittia is for the market to show this to producers. This is what I had to tell you. Frizzo, now you have the floor.

Thank you, Edgar. Now, talking about the stock market, what I would like to highlight is our repurchase program. We have a fourth program open. We have executed around 25%, 1.100 million in stock. We aim to keep the same strategy, seizing this opportunity, knowing about the detachment between the market price and what we hope is the intrinsic value of the company. This is having a financial relevance for the company. As I said, in 2024, we estimated around BRL 40 million between the second, third and fourth programs. In 2024, we had a higher level of layout, where we were able to perform BRL 38.2 million, so reaching around BRL 80 million that I had mentioned in the analysis of our cash flow.

[Operator Instructions] Our first question comes from Gabriel Barra, sell-side analyst from Citi.

I have 2 questions here. The first one is, I was hoping to see a recovery in volume for this fourth quarter. The fourth quarter came well. But when we see the year's results, we see the EBITDA going down. Even though with a recovering revenue, we see a scenario with -- I mean, that is more challenging for a year. My first question is, what could -- should we hope for 2025? I see that we have an improvement in producers' margins. We see the market -- I mean, with resale, talking to other producers of inputs, this is a hard credit market and the producer is more leveraged. They have an increase in the margin, but we still see that this is really difficult. So if you could comment a little bit what could we hope for 2025 in terms of profitability, increase in stock line? In general, I think this would help us to understand the dynamics of the sector. And connecting to that, we saw an impact on the company, a relevant consumption in receivables. And it is -- in my perception, if I'm wrong, it has to do with the credit. I don't know if you could comment and explain the dynamic of the company and if this could be a strength for the next years to be in this credit market for producers. If you could use your balance as one of the forces for propelling growth, giving more credit, trying to get the market share, having a more robust balance. So if you could further explain this, it would be excellent.

Wilson, would you like to go?

No, I'm sorry, my audio was closed. Well, the first question, I think I can answer, and the second one is you. Well, Gabriel, actually, in the beginning of our presentation, we were even going to -- I mean, we see 2025 with many challenges. Some companies will be more efficient, and others that didn't perform the correct lessons will have more difficulties. However, now, when we get the 2025 scenario, you have more positive things happening. Everyone has sought inadequacy has done some important lessons within their business. So it is the following. We have many challenges. However, Vittia believes on the work that we're doing. We began in 2023 by restructuring internally. We allocated more efficiently our resources. So we believe that we will have a healthier year. We may even -- I mean, when comparing this first quarter, we saw some positive points. We are working towards this direction. But obviously -- I mean, I always say that in an open sky industry, you have many factors that will guide this. However, Vittia, even in its yearly proposition, we estimate a recovery of our numbers when comparing to 2024. Frizzo?

Well, talking about our capital, well, the worsening is due to the credit scenario. I have mentioned it that -- I mean, you can see that some would even purchase in a short term, and now, they are trying to seek a longer term with us. So I believe that it's natural in this restriction of liquidity and more delay in payments. But we have a balance by knowing that some of our clients may be seeking more terms, but they are healthy clients, as we can see from our history of nonpayment. So I believe this is a differential. We know that, as Wilson said, not everyone has such a robust balance as Vittia to be able to support the worsening in our working capital. And we will have to wait to see how things go throughout the year to know this scenario of credit liquidity that concerns everyone in the sector. We need to truly wait to have a good season for -- to wait for the financial points, the season plans, the behavior of agents. I believe that this is, without a doubt, one of the points that makes us more uncomfortable for the year. Given what Wilson said, some other [ fundamentals ] in the macro scenario are much better. And we -- I mean, we are concerned from the impact among clients and demand. But on the other hand, we are at ease that we will have a leverage to go through any issues with liquidity, credit, and we will even be able to benefit from it. We know that there is a flight to quality of resources, and we were able to obtain excellent taxes with a low spread. So agents are preferring safer names. So we have an attractive capitation cost in face of what we have seen in the market.

Our next question comes from Pedro Fonseca, sell-side analyst from XP.

I would like to make a question or 2. The first one is regarding the inoculants market. I saw you mentioning that you speculate that it had diminished in '24. So if you could further explain what you saw that would suggest the drop on this market and what is the expectancy for '25 if you're going to recover this market? And perhaps the other 2 follow-ups, actually, of Barra's question is regarding the restricted credit. Does it affect your clients? It does affect other clients, too. And within this scenario, I would like to understand if perhaps this M&A conversation will come back to the table if you identify potential opportunities within the market. And still regarding credit, correct me if I'm wrong, I think the company -- I mean, the most important date to receive was in the end of March. And eventually, if they are seeking more time for payment, would it change things for you? These are my questions.

No, no. I'm going to talk about inoculants, and later, you give your input, and then, Frizzo. Well, the issue of the inoculants market, as an important point, and even the drop in the revenue was not only due to the use. There was an accentuated drop on the prices. Last year, I believe that all producers, agents were concerned. Especially, we see that these are the normal months when you begin plantation, too dry. The industry ended up getting frightened, and there was a drop on the prices. Last year, producers within the major norms, functional norms, did what everyone has to do when you have a challenge on the reduction of your revenue and consequently of your profitability. They also did their homework. They sought a better equation. They have been doing inoculations on the previous years. You have a certain reserve on the soil. It is really important for inoculation. This is more than propagated by Embrapa. But they have reduced truly the use of inoculants. So automatically, we were caught into 2 important points, dropping prices and reducing the use. What do we hope for 2025? To come back to normality. There is a new technology [indiscernible] this product has been growing, and there was an accentuated drop in prices, but it has been growing its use even in other cultures. Other companies are working for new cultures. So we understand, for 2024, a market that is more normalized. This is our view in our inoculants. Do you want to say something, Edgar?