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

[Interpreted] Good morning all. Welcome to the videoconference of the sharing of results of the first quarter of 2025 of Vittia. This conference is being recorded, and you may access it online where the presentation will also be made available for download. We would like to inform you that all presenters will only watch the videoconference during the presentation and then we'll have a session of Q&A, when we have more information. Before we start, I would like to highlight that the declarations here made are based on the beliefs video has and the available information to its management. They may include risks pertaining to future events and therefore, depend on things that may or may not happen. Investors, analysts and journalists should take into consideration that given this factor, all results may be materially different than those expressed here in the declarations made. Here in the declaration, we have the CEO, Romanini; Alexandre, CEO and Chief Director; and our Director of Marketing. I will now pass the floor to Wilson Romanini, who will begin our presentations. Wilson, you have the floor.

[Interpreted] Thank you very much, Liz. Good morning to all. We would like to showcase the very first results of the first quarter of 2025. And then we'll answer to your questions and concerns know that we are available to enlighten you. Speaking about our market view, when we talk about Vittia's performance during the first quarter of '25, we have a growth in consolidated net revenue. You are familiar with this soil growth that we had a very good performance. This has an expression that is very good in terms of aggregated value, but it's also something where we have a smaller margin. What is important is for us to understand that agriculture and farmers regardless of difficulties have believed in their businesses and therefore, have invested in their soil. During the first quarter, we've seen a lower aggregated value that has directly impacted our group, and we have worked in a very intensive fashion as of the end of September of '23 in a rationalization and betterment of the equation of our resources. And we have, therefore, managed to truly have positive outcomes in terms of collective things. And this allows us to understand things that are not available in agro, but to provide help in terms of finances for our company. This year, we have something new, the product that will truly have a great expression in terms of control of diseases that affect cultures and leaflets and leafs. And so we have a very good opportunity to perform in this segment in terms of disease control. When we talk about risk assessment and opportunities, we truly have a scenario that is challenging in terms of agribusiness. And currently, we have an analysis of the results from producers regarding all cultures, and we see that this result is still positive, but we see a high index of leverage within the sector. And we have a tax rate that is truly expressive. So those that have high leverage rates truly face challenges, and this is translated into companies that offer products, such as those that have high leverage. And truly, we know that things aren't as easy as it should be. An important topic that we should talk about is that we have a product that controls Vittia as you know it. And this year, due to a lack of resistance, the key resistance, we've seen a high incidence and pests and producers had to use strong chemicals for control automatically. This allowed them to have a control of leaf hoppers and this reduced the use of other chemicals. So the important thing to mention in our work together with Grão de Vittia and other technologies that we have is that they are very efficient in the control of such pests. So we are getting ready for next year in order to address the caterpillar issue as well as the leaf hopper issue. We have, as we mentioned, a better expectation in terms of results for our producers. This shows that a company such as Vittia that is well structured has done its homework and allows us to truly choose the best possible harvest for 2025 and 2026. We are still positioned in the same way. There is a discipline and financial solidity regarding the rationalization of the structure of the company. We know that agro has -- as of the 30th of April in terms of what has been received, we have been truly efficient, particularly in the credit concession lines that we had. So we did a great job on this, and this allows us to have a lower leverage within the company. We have continued to face the same things. Our commercial branch is well regarded. We have representatives throughout the entire territory, always strengthening our commerce and the portion pertaining to our products. Now talking about improvements, we are always trying to improve in terms of efficiency of what we have. And without a shadow of a doubt, we look for innovation in terms of products so that we can offer things that are always more interesting for rural producers. Next slide, please. Now talking about our highlights. We've had a net value growth during the first quarter of '25 in comparison to '24 of 13.4%. And as I mentioned, we have done intensive work in terms of growth in the soil fertilizer segment. So we had an expressive growth of 55.2%. And as I said, this is a product of lower result, but this showcases that producers are indeed invested in their crops and harvest. Within our intensive works, we have worked on the rationalization of expenses. We had a decrease of 1.9% in our SG&A in comparison to last year. We had a small growth in the EBITDA. We had a CapEx of less than 24.8% regarding the yearly allocation. And this is aligned with what has been done in 2024. The net result was a negative. This is aligned with the products that we have done. So we do ask for a little bit of rentability in the operation. And we have also done payments and repurchases and buybacks of GCP. And we have a great project that is science that will be implemented for the harvest of '25 and '26. I will now pass the floor to Frizzo and he will move forward with our presentation.

[Interpreted] Thank you very much, Wilson. Good morning to all. I'm going to start talking about an extraordinary event that took place this year where we have done the reclassification of operating segments, looking for the reality of businesses as well as looking at international tendencies, understanding the logistics behind the classification. The first 2 lines where we have joined the information pertaining to soil micronutrients and soil conditioners and organominerals that have similar characteristics in terms of being soil fertilizers of lower aggregated value have been addressed jointly. We had a strategy and a different business plan for organominerals. And as you know, we weren't successful in this initiative. And so this line lost attention and relevance within our business as well as the micro soil -- micronutrients, which isn't truly a focus of our efforts. So these are 2 branches that are considered marginal in our day-to-day activities. And we try to have more synergies in terms of leveraging businesses. These lines were jointly classified as soil fertilizers, as I mentioned. And then we look at biopesticides and inoculants, which are also branches that we saw in a joint fashion. But we have readequated this because in terms of bioclassification in the market, we have understood that there is a need to expand the scope of what we understand in terms of biopesticides. And we think that it is important to share and talk about this in a way that the market can understand. So, on top of biopesticides and inoculants, we brought together the biostimulants and atypical standards based on minerals. So, we call this entire category biological and natural solutions, which is a terminology that is commonly used in the marketplace. Lastly, we have the line of full year fertilizers, which is something we had already pointed out as a net revenue that can be seen in a joint fashion together with industrial products and others. So I believe that within this classification, we have simplified the way in which we see our businesses and we align this with the international tendencies of companies that report outside of Brazil, even that we don't have a direct comparison here in the country. But we have classified it within this product line that has been regathered reclassified. Now talking about our performance. As Wilson has already said, we've had a trimester of great sales where the segment of soil fertilizers between micro and organomineral have grown from 50% to 55%. We had an expressive growth in the portion of industrial full years that was propelled by products of lower margin. And this growth has come from markets where Vittia wasn't working beforehand, markets that had and still have product demand of lower aggregated value. Such as sugarcane and the production of citric fruits. So what we did was look for more businesses, but they came with a margin that was tighter given the products that are consumed by our clients during the quarter. In terms of biological products and Natural Solutions, we had a growth, but the line of biological defenders had a strong impact in terms of technologies in our portfolio, particularly in this portfolio, because we have addressed a more specific matter within the market of corn, which is one of our biggest marketplace. But this is a long-term matter. We believe that we have technologies to place products in the market, given the higher incidence of past, of caterpillars in this year and given that we noticed that products weren't truly being dealt with because this was not a recurrent plague for the past few years. Moving on to the next slide. In terms of gross profit, we had a slight drop in margin. And this happened because of the mix, as explained in the previous slide, the best performing lines of investments for those where we focus on lower aggregated value products. And this had to do with the moment of the market. We see that producers are more conservative and are looking for more conventional solutions. However, we see there is a use of technologies and we believe that this can change throughout the year with an expectancy of a better harvest for '25 and '26. Now talking about SG&A. We had another reduction in our quarter of SG&A. This is not really a process that we do from semester to semester. However, this was something that was announced as of the end of 2023, where we understood we would have a harder market, particularly in terms of grains. And so we looked for a rationalization of the company's structure, particularly the commercial portion. Last year, we structured the company so that we can be more rational and this showed itself during the fourth quarter and now the first quarter of '25. For the rest of the year, we do not expect new reductions. Of course, you see that we have a challenging market and that we'll have to accelerate certain expenses and investments, but we do see a slight increase in expenses given the present scenario of agribusiness. So due to a result that has been considered stable in terms of gross revenue and profit, we have managed to deliver an EBIT that was very well adjusted in comparison to the worst semester we had last year. We understand that this is a reasonable result. We have lower representativity in the semester in comparison to the year. So this does not compromise our expectations for the rest of the year, where the spells of our harvest will strongly impact the rest of the year. So even if this showcases what we have lived during the harvest of '24, '25, which was a very hard scenario for producers and in companies. And I believe, we have navigated this period well, trying to leverage our mix of products. We understand that our mix wasn't ideal, but we have to remember that we have technologies to help producers when they are trying to have lower expenses and when they are looking for reductions. So in this sense, it is better to have this kind of contribution than to have no contribution at all. And now when we have an increase of investments from producers, we'll have an increase of aggregated value. So I believe that this is a result that is satisfactory, particularly given this strong scenario of our harvest of '24, '25. Moving on to CapEx. We've had a considerable drop, but it is reasonable. It is not what we expect for the entire year. But given we have already announced, this is a strategy where aligned with the current market momentum, we are being conservative in terms of CapEx. We have increased our investments in biopesticides last year. And the current strategy is to focus on small investments within our structure so that we may increase production and reduce costs, looking for a rentability of our manufacturing infrastructure and our base of capital. So this is the strategy we have implemented for the past few semesters and will continue to do so throughout the rest of the year. Regarding cash flow, we've had in the quarter a consumption margin, which is natural. It's a cash variation that is natural before we receive our harvest where our net debt naturally increases. But last year, we had a relevant increase on this cash flow, because of the recomp program. During the last 12 months, we have invested around BRL 64 million, and this without a shadow of a doubt has a strong impact on our net debt. However, we still understand that we are so comfortable and under leveraged in a way. We could continue to rotate this up to 2.5x, given that the depreciation can happen within this context of EBITDA that I have already mentioned. So we feel very comfortable with what is happening currently. Now due to the increase of name base leveraging, we had a lower net profit and net margin, which was the main factor that caused an increase in the tax paying and personal contributions. We had a strong impact last year regarding the end of subvention. So our assessment will be very similar in comparison and should not hinder the comparative result in comparison to last year. I will now pass the floor to Edgar so that he can talk about our launching strategy and innovation strategies.

[Interpreted] Thank you very much, Frizzo. First of all, good morning to all. I would like to briefly talk about what we've done in terms of development. We are focusing in the launching of Triunfe. It is innovative as a mineral multi-site in comparison to those available in the market, it has showcased a very superior results. It is more stable as well, which is something that we have faced as an issue in terms of competition. It has over 35 partner institutions and has been validated in a several tests. So we are very confident in following this strategy, and we would like to focus on this product. Within our EDI investment in innovation, we follow forward with our investments. We've had a decrease of 23% in comparison to last year, particularly in terms of CapEx, but this has to do with seasonality. We have not reduced the number of projects we have nor have we reduced the number of collaborators in our EDI domain. We have launched 2 new registries that are important for us, bioproducts that will replace those that are in line in terms of innovation and which will also bring more rentability, profitability and results to our producers. And that's what I wanted to talk about.

[Interpreted] Thank you, Edgar. Regarding our stock market and our recomp program, as I mentioned, we have over BRL 60 million for the past 12 months. And during the first quarter, we had BRL 4.3 million repurchased resulting in around 25% of what we have in terms of approved limit in our fourth recomp program. During the quarter, we also had the payment of around BRL 20 million, reference to the personal capital that was deliberated upon last year. And we have a difficult scenario in terms of stock market, as you know, but we remain confident in our long-term strategy, and we believe that we are living this harsher agribusiness scenario and Vittia is very well prepared, as mentioned by my colleague. We have done and will continue to do our homework regarding adequating to the market and its current situation. But we sustain our focus in the improvement of our structure as well as in looking for new technologies within our efforts of innovation as has Edgar mentioned. We have not therefore reduced anything regarding our seasonality. We can now move on to the Q&A session, please.

[Interpreted] [Operator Instructions] Our first question comes from [ Rio Masayama ] analyst from Itau BBA.

[Interpreted] I have some colleagues here with me, and I wanted to understand the margin of producers, how you're looking at this? You have emphasized that you are very optimistic for the rest of the year, but I want to understand because there was a raise in the cost of fertilizers, we have high taxes. So we want to understand how you can be so positive facing the scenario? Now with the rise of these fertilizer prices, how can we talk about biofertilizers and chemical fertilizers? And the other question pertains to Frizzo. We had already talked about the quarter, and I believe that now you have a better idea of the product performance. But what is the relevance you believe this product can have within your portfolio given that this is a new product, can we consider better reachability in comparison to other products with better commodities? These are my questions.

[Interpreted] [Interpreted] I'm going to talk to you and then I believe that Edgar can talk about Triunfe and the price itself. I believe that when we talk about producers' margins, we need to consider certain complexities. When we analyze the harvest, with high expression such as grains, soy, corn and its relationship, thinking about the harvest and the second harvest, these are interesting numbers. There are groups that have prepared in terms of acquisition of [ BNTU ] and this will provide interesting results, but producers that have left this to the last moment such as the potassium line won't truly hinder their results, but they will have a drop in margins. This is natural. And one of the main issues we face currently and that we have been facing since 2023 is that of costs. If we go back 3, 4 years, we had a considerable average of 15%. And we know that, this changes in terms of CDB. So I took part of this events, of these works done within agribusiness, and we've faced prices such as bird flu, cystitis. We had issues with hydro resources, but things used to recover quicker. And we think that this is an issue that won't resolve itself so quickly. We don't have an expectation in Brazil in terms of tax rate drop. So we have to optimize, analyze case to case and then start to have a more positive business perspective. However, margins do exist, and we have a cultures that are still having good rentability. So we have coffee, sugarcane. So when we look at this from a macro perspective, things are not easy. But for those who were truly well prepared, there is no doubt that they will come out of this very well. And this is the work that Vittia has done. It noticed this and slowly reduced expenses and made resources more properly implemented so that we could truly address what is more or less a tradition in agribusiness in Brazil and around the world. Now, when you talk about bioproducts, we do have technologies, not only biotechnologies, but also products that can -- such as biostimulants that were reformulated under analysis so that we can understand how this has been showcased and diffused around the world. We do have technologies that can improve the performance of nutrition and automatically reduce the process of macronutrients presence in soil. We have technologies for this, and this is a work that we have done. Now talking about Triunfe, we have an innovative product that we are guiding on for you to understand this is already a reality in Europe. It is just new for us in Brazil. And this is not a product that provides a very big margin, but has a very interesting contribution. When we talk about the market, we are talking about BRL 3.5 billion to BRL 4 billion and Vittia wants to intensively take part in this. It has some learned lessons that have shown the efficacy of the product. And currently, this product is aligned with its competitors. It may even be more efficient and provide advantages in terms of applicability. We often mentioned that this is a product that in order to win, we say the products need to be efficient without a shadow of a doubt, and this product has this freely. This is a product of high market competitivity. And it has something that is even better than what competitors offer applicability. It is easily managed, used, has great performance in terms of preservation of equipment and therefore, it is revolutionary. So the market needs to assess this. We have conducted work with many consultants and institutions. And we do see that this will indeed have a high performance within the company. I believe that Edgar can talk a little bit more about this.

[Interpreted] Yes, indeed, we have seen strong recent results during the harvest work that we have conducted recently, and we see excellent product performance. Something that we have noticed is that we need to fulfill this market space, we have understood. And Brazil still has available certain mechanisms that are forbidden elsewhere. And we understand that this may eventually happen. So we need to occupy a new market space.

[Interpreted] Our next question comes from [ Pedro Gama, analyst from Swtich ].

[Interpreted] I have 2 questions to make. The previous question was talking about producers and the competition in the input market. I believe that you have taken part in many events for the past few weeks and months. And I wanted to hear from you in a detailed way how you have seen the dialogue between producers, whether the improvement in soy harvest can increase investments regarding this correlation with the cost of fertilizers and how this can impact the growth of the next harvest. On the other hand, I wanted to know about capital allocation. The company will continue to do this work. And I wanted to hear from you regarding this because we have heard a lot about the distribution of inputs and difficulties. So I wanted to know whether there are conversations that are ongoing. So if you could talk about this, it would be great.

[Interpreted] Regarding producer feelings and relationships, I believe that we have something that is very well structured. We were concerned and did our due diligence. And of course, these people exist. When we think about grain harvest from the U.S.A., for example, we've heard of lower soy production in which people created a report pointing towards an increment of productivity. And we know that things don't really happen in this fashion. So let's say that we have a full tank. And so any change in world offers can provide us with interesting surprises. So we have an enormous horizon of producers in Brazil. And I think that there are people, who are very well structured and will indeed make investments and others will try to the re-adequate process and that's what we see. Currently, we see that expenses are an issue not only for Ag, but for all sectors in Brazil. And I think that the biggest observation that we have to do has to do with that, not only to rural producers but to all who need credit lines. I think this is very clear. I have mentioned this often and said that when we look at previous crisis such as hydro crisis, diseases, they happened and were traumatizing, but they passed on quickly. And we don't see this happening. You from the financial market probably see this even better than us from the stock market. So we still need to work in a more efficient way in terms of businesses in order to provide support for corporations. That's what we see. In terms of capital allocation, I'll pass the floor to Frizzo, who is more of an expert.

[Interpreted] Pedro, we have kept this same perspective from the last quarter. sustaining what we have talked about for the past few months. Without a shadow of a doubt, we see a heated market of M&A, but we are more conservative in this initiative. We understand that the market is needed because of actives and problems in terms of important levels of leverage or been navigating this in a difficult way due to the current scenario. And they are looking for openings in front. And of course, some are not yet in the scenario, but are still looking for an evaluation perspective that isn't aligned with the current scenario. So we are looking for something that is closer to emblematic transactions of biotech, for example. So we don't see this as an attractive strategy. None of these conversations and problems are looking for something comparative to what Vittia has in terms of pricing. So we can dedicate ourselves to this front. And without a shadow of a doubt, as long as we have more detailing, we can focus on recomp or in this distribution movement for our action years. We are still monitoring, looking at transactions. We continue to be a part of this strategy as a whole, but the current scenario truly doesn't seem to be interesting for us. So that's it. I think that was the last question. I don't know whether we have more questions, but that's what I wanted to say. We are further analyzing opportunities. And our current focus is more in the repurchase and redistribution program.