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

Good morning. Welcome to the video conference to disclose the information from the second quarter of 2025. This video conference is being recorded, and the replay can be accessed on the website of the company, where the presentation will also be available for download. [Operator Instructions] Before we begin, I would like to reinforce that the prospective declarations are based on the creed and suppositions from Vittia and the current information that are available for the company. These declarations can involve risks and uncertainties considering that they regard future events, so they depend on things that may or may not happen. Investors, analysts and journalists should consider that environments' situations involving the macroeconomic events may make the results differ from the ones that are presented in the prospective declarations. We have here in the video conference, Wilson Romanini, CEO; Frizzo, CFO; and Edgar Zanotto, the Innovations Director and New Business. I would like to pass the floor to Wilson Romanini that will begin the presentation.

Thank you, Laís. Good morning, everyone. We are here going to present to you the second quarter of 2025. I think that there is something really important within our company despite this challenging scenario in the agribusiness given the high rates of interest, the commodities with reasonable pricing. However, Vittia is having an excellent work being performed. We have an important cash flow of BRL 115 million. We have a growth in soil fertilizers, which shows that the product is understanding what it needs to be produced, performing its investment in the soil with positive characteristics to have a better harvest. Considering what we have been talking always, working towards a process of internal rationalization. We have a decrease in our SG&A, [ getting ] our resources in the best way possible. We have an EBITDA that is almost BRL 14 million in the first semester of '24 (sic) [ '25 ], a growth of revenue, which is not translated into the best results yet as we are not performing business with projects with a smaller margin, but we have an important portfolio, and we hope we can have a year that will be truly positive for our company. We have our program for repurchase and the JCP in which we are having results to distribute to our workers within our company. We have the launches, new launches, I believe Edgar will talk about them. Ever since Vittia is going through a moment despite all the difficulties within the scenario, we can see that we are doing whatever we can, and we are working really well. Now we can go forward. Talking about our performance, we had -- despite all this scenario, we had a growth in our revenue. As I have told you, the producer is investing. They are applying for soil micronutrients. This has an important characteristic where they are leaving the soil ready for high productivity. We are working effectively in working with our expenses. And despite this scenario, we had a strong cash generation showing that we are really backed up and working good [ involving ] credit concession within the market. When we talk about risks and opportunities in the current scenario, we still have a challenging scenario for our Brazilian agribusiness. Vittia within its way of conducting business is being able to have a good balance within its functional process. About the off-season crops, they are being really interesting -- we do not have an attractive pricing -- highly attractive pricing. However, we are having a profitability with producers. Within these scenarios, farmers are resisting closing business. So we understand that truly we will have a second semester that will be truly strong when we talk about such definitions, and they are the products where Vittia is leading with technology, where we can aggregate a more interesting value. As I have said and Edgar will further explain about the launches, this has been aggregating a potential for revenue within our company. When we talk about our position, we have and you know really well, we have a long history within our business, and we understand that we need to be rational when we think about debt. So our company has a comfortable leverage. It's balanced when we talk about such a thing as we know that the agribusiness has its moments that are really good and those that are really difficult. So this financial solidity is one of the principles of our means to manage our company. Every time we are close to rural producers, it's an important thing for us to talk about. We have been working in other areas, other cultures and thus, we reinforce our position within the market as a whole. Our evolution is constant. We try to evolve, our R&DI is robust, and this is a work that we continuously perform within our company. Another important point within Vittia is that we have a verticalized process, and this gives us a capability in terms of costs, when we talk about competitive costs. And without a doubt, we have a more robust portfolio within the market when we compare to our competitors. Frizzo, you have the floor.

Good morning, everyone. Now I will detail our financial performance. So going through the growth of our net revenue per segment, we had as Wilson mentioned a growth on the quarter, on full year soil fertilizers, a growth on the semesters, while on Biological and Natural Solutions as full year fertilizers and industrial products, we had a decrease for the quarter. For the full year, we still keep a growth when we talk about the year. And for Biological and Natural Solutions, we had a decrease. This movement of growth in soil micronutrients, fertilizers can be an indicator that producers will invest. This line is one where producers have the anticipated definition in the soil line, and we are seeing a delay on foliar and natural and biological solutions. We can see that we still have some business being closed later on given what we had last year. However, this is a line where in this quarter, we already have an expressive profit. These are products where we can already deliver on the second quarter. And the second quarter is one that had this characteristic of being impacted those who have a later definition from producers that were impacted by this current moment where we have a certain uncertainty that has impacted producers and has been making them delay their purchase decision. And later on, we will understand better how will things work out in truth for the '25, '26 harvest. We just know that they are delayed and the negotiations are coming at a later time. In terms of our gross profit, we had a drop for the quarter. And in the semester, this drop is due to the mix, both on what is consolidated as the soil fertilizers was the one that grew the most. However, the -- is the one that has the smallest updated value. However, within the segments, when we observe these segments, for example, for full year fertilizers, where we have a complete portfolio with high-technology solutions, we have also seen a mix where solutions of medium and low within the semester ended up performing more than the high-technology solutions. And for Biological Solutions and Natural Solutions, we can see that in the trimesters, we had a mixture where the [indiscernible] value products had a better performance. And we had a Triunfe which is a product that has a smaller elevated value than the Biological fertilizers. So we had a higher weight for natural solutions than for pesticides that have a highest value. Although we see and this is a point that will possibly will be an agenda in our Q&A, we have a scenario nowadays that is still with a lot of pressure. We don't see a lot of drops in prices. However, we can see decreases. It's not a scenario in which we can pass this pricing on. However, for biological fertilizers, looking at the lines that we have, we have no expressive drops as we are now considering being able to compensate this small drop in prices with the higher efficiency in our productive system. We have a margin within the fungicides and insecticides lines that is relatively similar with the same period that we had last year. However, we compensated the drop with efficiency, and for full year fertilizers, we see similar margins, when comparing to last year we see some decreases. However, without a similar scenario like last year in which we saw major decreases. So although we see decreases, we can see that there is a mix in this scenario. We had a margin recovery for soil fertilizers. And I believe that this is due to the reduction that we had in our organominerals line. We have been reducing it trying to solve this issue. And according to what was disclosed in our [ ADF, ] we closed the operations in Patos de Minas on the 30th of July. It was an operation that had been causing some prejudice. Semester-by-semester, we were trying to close it off, and we have now been able to finish it in this quarter. We are going to have a report of disclosure and the impact that will only be available for the next quarter. Well, under the standpoint of SG&A, we have been keeping our strategy and have had results. We had a small growth of around 1% for the quarter, and we have kept a drop for the semester. It is important to state this is not what we hope for the year. This is due to the things that happened last year that are being reflected upon this comparison semester-by-semester. However, we understand that in the second semester, we are going to have a growth aligned with our strategy of keeping our activities standing for R&DI and market development. So we have already performed adjustments last year. And now we understand that the structure that we have made available is the correct one. Okay, next one. As a result, we have an EBITDA that is slightly negative when we compare it to last year. And it's important to highlight that we always hope to have a negative EBITDA in the first semester. This is a thing that is traditional in agribusiness in Brazil. It's the seasonality where we have the summer harvest impacting on the numbers of most companies. And we understand that this slight drop does not represent what we intend to do throughout the year. We're talking about a delta of BRL 2 million, although the percentage is important, we see it's around BRL 2 million. Well, among our CapEx, we have been keeping our strategy, we have announced last year as SG&A CapEx is the result of actions that have been taken last year. We have been invested in projects of smaller financial impact. However, one that will impact our operational efficiency and cost reduction. What we highlight for 2025 is the line that will back our growth in natural pesticides, which would be our launch of the Triunfe that Edgar will mention how this launch is going. And then a relevant point to mention for this quarter is that we had a lot of success on the '24, '25 harvest when we talk about our cash flow. This is due to a commercial strategy of sustainability when we seek partners, long-term partners and aligning our commercial and financial views despite having a complicated scenario when we talk about credits for agribusiness, we have been keeping our indebtedness in low standards, and we had an excellent performance, allowing for us to significantly reduce our leverage and have a net debt smaller than last year. We had 0.88 of net debt EBITDA against 0.96 when we compare to the same period of last year. We understand that this is an excellent performance for cash flow, especially when we consider that we have also invested for JCP and our repurchase program. We have almost BRL 40 million that left the company for -- as a return for our shareholders. And even so, we have reduced our leverage index. And let's remember that this is a strength in the current scenario. So Vittia has a position in cash that is comfortable and it makes us feel [indiscernible] to spend this most difficult moment and see the opportunities that arise in the market. Regarding the financial result, we had a natural worsening due to the growth of the basic interest rate. So we have an important growth that has impacted our financial results under the standpoint of income tax and social contribution this year. When we compare the same base result the end of [indiscernible] that is at 34%. And as a result of this trimester, we had a bigger project days when we compare to last year when we look at the trimester to semester. Now I pass the floor to Edgar so he can mention our innovation.

Thank you, Frizzo. Good morning, everyone. As was mentioned on the launches that we had, we are focused in communication. You may have seen those who follow our social networks. And what I can say is that we are going to surpass what we planned for this year for this project, what we had imagined that we could arrive to, we are going to perform even better than we thought of. The works that we have been doing have shown the results of the consultancy that we had. So things came to evolve much faster than what we were hoping for. And this is what I can say for now. We had other two launches to substitute products that we have in our portfolio, the Meta-Turbo Max to substitute the Meta-Turbo SC and WP to substitute Bovéria-Turbo. And within these two insecticides, they are a fruit of our R&DI in which we have been using new Metarhizium anisopliae and other types of fungus. So what changes is that they are more aggressive. They are both insecticides. It's as if we had two big dogs protecting Vittia and they are doing their excellent job. And now we have two big dogs working in. These are dogs that now can bite people. So basically, this is the change that we have been doing now, and we believe that these products will evolve really well in which [ the ] companies have such technologies for this product. Let's go for the next one. When we talk about R&DI, we have been keeping our investments, especially when we look here the CapEx, OpEx, we have a seasonality. And sometimes, you have more and less investments. However, we continue to invest with all of our active products. We didn't finish any products, actually have increased some products recently -- products. We have three new registries, products that are being launched, two new recommendations for biological use/targets, some products are not yet registered. And now we have new things to show, and we have a renovation of a new product that we will be able to show soon. And an important thing, I can see that there will be a question about this -- about the commercialization of Vittia Mexico. We have a first business request, a small one. We have a portfolio of 12 products that can be commercialized there, but we are still focused on the development of the market. We have a team of market development, and we are focused -- has been harvesting [indiscernible] we are now going to develop our market to have business for next year. Next one. Now I give back to Alexandre Frizzo.

Well, regarding our stock market, as you all know, we went through a difficult process, not only at Vittia but agribusiness itself and stock market itself. So our stock ended up not having the performance that we hoped for. And what we highlight is the repurchase program where throughout the semester, we had more than BRL 10 million invested in the repurchase, believing that our stock do not express our intrinsic value. Our idea, as I say, is to not have an aggressive repurchase but given this difference between market value and intrinsic [Technical Difficulty] to allocate your resources of our current shareholders [Technical Difficulty] are performing via blueprint according to the [indiscernible] without resources. [Technical Difficulty] thank you [indiscernible] temperature right now is medium to low [indiscernible] for our shareholders considering the dividend yield, generating a dividend yield. Now we can go for the Q&A session.

We are now going to begin the Q&A session for investors and analysts. [Operator Instructions] Our first question is from [indiscernible].

First of all, let me talk about the biological segment, focusing on the EBITDA. I think you were able to explain what happened in the quarter given the delay in business negotiations, but you have also said that the portfolio was of requests was better. If you could explain how is the commercialization for the year? How do you believe that this is the dynamic when we talk about pricing? What about the gross margin? Do you believe that this mix of smaller updated value will be kept for the next quarters? And my second question is about the allocation, the cash flow was really positive for the year. It seems that throughout the year, you need less capital. So what do you think about how you're going to allocate the cash for the company? Are we going to have more buyback, distribution for shareholders or M&A? This is my question.

Wil, you are muted.

Okay. Well, when we talk about -- well, your questions, we truly had a major movement in soil fertilizers, especially in micronutrients. That's what I have said, this shows that farmers are investing. This is part of the process, and it's truly important. And when we look at the year, we truly have a producer that is more concerned with certain means of conducting things, they are correct. They should observe or they want to understand things more. However, Vittia, has been working with structuring in commercial business, this proximity, we see new cultures, new markets, new areas, and this has been enabling for us a higher business volume. So when we look at our portfolio, it's extremely interesting, better than [Technical Difficulty] last year, especially when we consider this older technologies, soil fertilizers and so on. So we understand clearly that we will be able to perform in a positive manner in 2025. That is the work that we are doing. We have within the market a major concern with credit. The market -- I mean everyone is noticing. We have a high interest rate, a certain rate of leverage in the sector that is really high. But we have been working internally. We have ourselves so we could offer good solutions for the market towards having good partners. In a matter of pricing, we see no increase in prices, the decreases that we saw back then in 2024 are not happening, as [indiscernible] has said. These are just some things that happen here and there. So I believe that we have the possibility to have a positive year within Vittia. An important point that I would like to highlight is that Vittia has a strong characteristic in the industrial process when we perform an analysis with our competitors, we are within a more positive position. Now Vittia is a company that basically -- it does almost everything within it. So this gives us a capability. We can face the market. We can be competitive. We can take to producers an important cost-benefit relationship. This is the work that we have been doing [Technical Difficulty] and the allocation of capital, I believe that Frizzo can further explain it for you.