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

Welcome to the video conference of the results of the fourth quarter of Vittia. This video conference is being recorded, and the replay can be accessed on the site of the company, where the presentation will be available for download. We inform that all participants will be only watching the video conference during the presentation after we're going to go to the Q&A and further instructions will be provided. Before we continue, I just like to reinforce that the declaration is based on what Vittia administration believes and the updated information to the company. This declaration can involve risks and uncertainties that has to do with the future events. So it depends on circumstances that can or cannot happen. Investors, journalists, they should take in consideration on the ambient on the environment can make -- the results can be materially different from those expressed here on the declarations. They are present here in the conference, Mr. Wilson Romanini, CEO; Alexandre Del Nero, CFO and Director; and Edgar Zanotto, Director of Innovations and New Businesses. I'd like to give the floor to Mr. Romanini that will start the presentation.

Thank you very much, [ Elis ]. First of all, good morning. I'd like to start telling you guys, -- we live in a very complicated period in agro and Brazil as a whole. So when Vittia comes here to do this presentation, it shows that it shows that how to work in this difficult market. Of course, that we would like to show better things, better results, but we're going to show you guys, it reflects a lot the period that Brazil is going through and the responsibility that our company has in this moment that a bit harsher environment. We have some interesting numbers. Cash flow of BRL 110 million, basically 70% better than we had in 2024. We had a little growth in revenue. Of course, the market, it's a little bit more complicated that they tend to consume products that has less of a value, but we were able to increment in 4.2% our growth and related to 2024. They're searching alternatives now because of the market to have results in their operations. So we try to go under the fertilizers, soil fertilizers. And Vittia as a company that has a very wide portfolio. So we understand that and did a work -- a very interesting work in this line of growth of 43.2% in the growth in soil fertilizers. Our debt fell going to 2024, 13.4% -- it shows that the rationale that we're doing here inside the net debt, understand that the market is a bit more difficult. I think we're doing a very good work internally inside the company. We had a fall on EBITDA that was adjusted because of the market itself. So it was a leverage, very low leverage. So that is -- even though that's still a very triumph of the company, even though all the matters related to payments, JCP, and we bought some company stocks because we believe in our business. And it's a business very interesting too also. It's Vittia Mexico. It's starting the commercialization now with a very potential -- interesting potential this year. So we don't stop here to look for alternatives to have someone to always keep the company healthy. Can go for the next slide, please. So talking about the market, our performance, we're working on a rationale that is very robust, trying to understand the market now. I spoke before here about the development about the soil fertilizer. It's a very -- we're very disciplined in that into our DNA. Like I said, we understand that inside the company, we're able to bring results even though having discipline very big in these expenses, we are able to have an increment of revenue. So we did a strong cash flow generation, strong operating. It's the quality customer portfolio and efficient credit policy. We talk about risks and opportunities. It's the current scenario. You know how it is now. I told about in the previous presentation that didn't exist a light in the tunnel and this tunnel is still very dark indeed, but we're able to go to cross this tunnel in a very interesting way. And you guys are seeing in the market, generally speaking, a lot of people that they're fighting inside this tunnel that they're having a hard time. So when we speak about our chain -- supply chain inputs, there's a rationale by the agriculture -- and our understanding we have for this year, 2026 from 3 -- the 4 products that we're going to be launching in 2026. The [ Vittia's ] positioning, we continue with this operational discipline. Like I've spoken before, we're all in the -- when it comes to [ P&D ], it's very focused. We're going to bring some of the years, the disruptive things inside the market. One of the greatest assets, it's -- I think it's this portfolio, this complete portfolio. So when you go through moments that are a bit more harsh or complex, you have the opportunity to establish a very well fair game. And we also completed the 55 years. Vittia celebrates 55 years of work, along these 55 years, 55 years of development, promoting development of the Brazilian agribusiness. And now we're expanding to other countries. This is what I wanted to tell you guys to let you know now I give the floor to Alexandre Frizzo.

Thank you, Wilson. Good morning to all. I'm going a bit into the detail of the performance. Like mentioned previously by Wilson, we had an extraordinary performance on the soil fertilizers and also followed by knowing the products of Foliar Fertilizers. I attribute to 3 factors. The first of all, it was the only line that we had a increment of price because it's a line that it's low value. It's a line where we can pass on price. It's based on minerals. And it happened last year. Beyond that, there was no retraction of demand in the line whatsoever. It's even though it's considered a cheap line for you to apply micronutrients. And at last, we had a very strong position in cost, and that's very competitive in a way that we gained market share. In the lines when it comes to Foliar Fertilizers and industrial products, story was a bit different. We saw a retraction of the demand. That's very much because of this moment of the farmer that it's looking to make some savings and to reduce risks and the intensity of -- to reduce the intensity of this kind of product. So when it comes to biological and natural solutions, we didn't see a retraction. We didn't analyze on the demand. We saw a demand that was solid, but we saw a high level of competitiveness in this segment. I've been saying a lot related to this subject specifically. We had a lot of new players in the market and old players, old players that got out of the market. So it's not growing the market in this sector that we were expecting didn't retract. It grew very little bit, but the amount of investment that is part of the sector. So we had a very competitive market. And that resulted in a certain difficulty to [indiscernible]. We didn't see the drop of prices that we watched the last couple of years, but we saw a stability or a small drop. And the inflation of cost is natural in Brazil. We have a logistic that has higher costs and labor. So that brought a scenario that's a bit harder for this line specifically. Now going to the next slide. Inside this dynamic complementing this vision, we had a drop of consolidated gross profit. It's a matter of mix. For example, the -- soil fertilizer acted very well in terms of revenue, had a bigger weight into the mix, and it had a smaller margin compared to the other lines. Even though it recovered the margin in the trimester and the year itself, this margin recovery has to do the rationality that we've been doing in our operation of organic and mineral where we had -- we were having success of losses. And now we're able, as you can see on the fourth quarter to change a bit the figure to go from a loss in '24 to a scenario of gain and profits in 2025. And in the year itself, a greater margin profit. We had a performance of increments of margin for more of internal moments because of the -- more of internal things because of external things on the lines when it comes to biological natural solutions, where we had this matter of restructuring. We suffered a bit this dynamic of the market that have a difficulty to pass this price that we're dealing with. There's a couple of price drops that we were able to have a margin compression in the biological solution, natural ones and full year fertilizer and industrial products. That was also the case. Now going to the next slide, talk about SG&A. We're talking about a lot. That's the part where we control, and we're able to be within our expectancy to have a growth between 0 and the inflation of the period. So we have a reduction -- real reduction of expenses in the company. That's orientation -- strategic orientation since 2023, understanding the market scenario and to look for efficiency and rationality of all the processes of the company. So we've been happy in this strategy in a way to protect our results. But without destroying the pillars that we have for future growth of the company. We understand that this market has a lot of perspective for medium term going lasting a bit less -- a little bit more than people waited. But in some moment, we will have this taken over again. Our projects that are still preserved for future growth. It's worth saying that this year, we had 2 events that was extraordinary, one that I talked already about in the previous quarter was the mobilization of the facility in Patos de Minas that generated BRL 15.6 million. It's an expensive that's no longer we're having. There are investments that are supposed to have a drop during the year. On the other side, -- we have a recovery for tributes recognized on the fourth quarter. In this environment of change, constant changes in reglementation, tributary regulation of taxes, we did a strong work to bring opportunities and changes that happened in the last couple of years that we were able to recover from the past. That it brought up a value very important for the year, BRL 24.2 million that contributed to the results. But we understand it's extraordinary revenue and something that's maybe not going to happen in the next couple of years. So looking at this adjusted EBITDA on this extraordinary bank, we had a drop. EBITDA was reported, the one that reported. We didn't had this drop below on this magnitude, but this is an operational mirror in 2025 with a drop of 13.6% caused by mainly by our loss of gross margin profit margin, EBITDA, it dropped 2.9 points be on 14.1% from 16.9% to 14.1%. This is the margin that is the lowest that we've had the company since we started to do this control, auditing from EBITDA, from the company reflects a bit of the moment that we're living in the market right now. And I said at the end of the year, I mentioned it's a low margin, but it's still a positive margin. It's a period of the cycle, low cycle. Now Vittia has a greater value now products that had in the next couple of years, but they had the last years, we work with compressed margins and formerly related to profits on the scenario -- current scenario. Now CapEx, we kept the same strategy to look for investments and efficiency in our factory, biological factory and the year only having one investment of greater relevance, which was in the factory and to launch the trial that was launched last year for investments that is BRL 6.3 million and the CapEx was very close to 2024 BRL 33.2 million, 1.7% growth compared to 2024. So when it comes to cash flow management, we have a positive year, giving all the search for efficiency in the company. We were able to generate BRL 110.5 million in 2025 on the operating activities and the rationality has to do from the operation for fertilizer, soil fertilizer and [indiscernible] mineral, where we're able to unify inside a facility to reduce stock and the high activity that we had in the soil fertilizer work with a medium to receive these dividends better than the previous years. And we've been keeping the good performance in a point of view of receivables and keeping it low with not a greater growth here. It's been a hard work of efficiency and search, always keep this financial discipline. It is -- when markets are good or bad, we're going to keep this mindset. We're able to, in 2025, reduce our dividends -- it was a very interesting performance for a hard year, and we kept a level of leverage similar to 2024, a level of 1.1x the EBITDA adjusted throughout the year, considering that EBITDA fell to the company, it's very healthy with a very good control leverage and all the capacity going through this hard period. And as I mentioned, to look and to [ recuperar ] to recover from the market that will happen in a short period of time in the future. So when it comes to financial results, taxes and adjusted net income, we had a -- compared to last year wasn't such a good result that the interest here was a little bit greater here when it comes to income taxes and social contribution, we were a bit more efficient compared to 2024 because of the higher JCP and the efficiency of our program to search of the law and the goods and related to our development team. And as a result, all the shares in the adjusted net profit and net margin, there was a drop of margin. But due to the current scenario, we see this as a positive thing because we still have profit at the end of the year, of course, not as we would like to, but the company is healthy. And it closed the year with BRL 60 million of profit, BRL 60.2 million of liquid profit adjustable. The reporting will be bigger because of the effect that we had from the recovery -- fiscal recovery. We are the worst years of market-wise, where we have companies that are going to insolvency or [indiscernible], bankrupt procedures. So we're still having profits. So this is a very important point that it makes us to understand that we're going through this period, and we're going to have better years ahead of us. Now it's Edgar turn to give us this vision of innovation.

Thank you, Frizzo. Good morning to all. I'm going to speak a bit about innovation. We kept -- we're keeping all the responsibility. We're still investing strong in our future to keep growing. And you guys will notice that we have this expectation with Triumph that was the launching that we had in this year in 2025 and start to have the results, inside consultancy producers when we're seeing beyond to having a better control to have the products in the market, it's bringing a gain of productivity. So we understand that we're going to have a greater growth. That's why we have investment -- CapEx investments in the factory. We have a launching forecast to 3 to 4 products in 2026. And I believe 2 will be biological ones that we're going to have some different things in the market. We go to the next market -- next slide. And on the investments, as I said, we see -- we were keeping our OpEx CapEx because we had some constructions. We bought -- we were building the lab, the research center. When we talk about OpEx and work and on a daily basis, we didn't -- we haven't cut any projects of P&D. Some projects are greater. Now some things are reaching an end. So we're going to keep on this rhythm of growth and to be ahead of the market when it comes to innovation. So we have some things, some new registry, these launches that we're going to have registration, we're going to keep the work in Mexico. We understand that this will be a very good year in Mexico. Last year, we started working on the market development and start to put some products into the clients' hands. Now we started the sales, and we realized that the sales that they are accepted better than we expected. So we're able to fulfill our plans there. So that's what I wanted to say. Frizzo, go ahead.

When it comes to stock markets, we have the buyback program. We did the same work in 2025, keeping our strategy, take advantage of gradually the opportunities, opening the fifth program of buyback that's still the fifth share buyback program. We're going to keep that strategy to keep the level of buyback program to understand that the price is -- it's off the real value, the real price. We know that we're in hard times now, not only the agro business, but the capital market, also Brazilian capital market makes us to have this differential, which is very different and related to price. Now Vittia, we say that it goes -- it's below the fiscal year as the auditing year. We have a relevant price into the factory inside our accounting, which is by the cost of -- that it was in 2020, the price of -- the cost of construction. Now we're below our liquid inventory. Of course, we have a low cycle now and things are going back little by little, the private market, any transaction that was announced on the last couple of times that it was value that was much higher than negotiated what Vittia is now being negotiated. So this is our strategy, but always in our way, in a conservative way and gradually, we've always taken the cash and to keep our health financial. And I'll also highlight even though all the scenario we're returning resources to the shareholders that were paying through JCP, BRL 33.8 million were paid as JCP. This is something very relevant and our financial solidity and even though all the scenario, was still able to pay BRL 50 million of return to the shareholders through the buyback program or JCP, and we reduced our nominal value. So this part, we need to highlight in this scenario, this current scenario, like I mentioned before, we know that the majority of the players that weren't able to deliver this kind of performance, not even not on the operational part and/or financial part, even though that we're not where we want to be and compared to the potential that we know that we're capable of. So we are going to start our Q&A.

[Operator Instructions] Our first question comes from Pedro [indiscernible] analyst from sellside from Citi.

Related to the questions. I'd like to congratulate you for the results given the current scenario, but -- and the derivatives and the fertilizer and petroleum logistics, how do you guys see the impact of the conflict of the business, the Vittia and the Brazilian products? It seems like the Brazilian products, they are going to upside for potential of the greater of agricultural products given the greater price of the that had the cost from this [indiscernible] that it's already blocked. How do you guys see that? And my second question is, given the sales delay that you guys seen in the end of 2025 and delay of the planting of soy, do you think some sales that were allocated to the next semester, the next quarter? If that's true, will we wait for a greater volume for this first quarter?

Pedro, [indiscernible] and then please you can complement related to, let's say, first of this delay on the fourth quarter of 2024 -- sorry, 2025. So let's -- it's not going to be this increment. It's not going to be this growth that really something to take consideration because we're observing the market. We have a proxy of discipline. It's -- and everyone is looking for this discipline. So it won't happen in a way it will happen in a normal way. There was no delay actually. Now that the producer, the farmer, it's rationalizing to put some things to make it viable the operation, his operation. Now in relation to the war and everything, oil prices, now it's premature to speak about it because every day, we listen to something different. I know the war is over, the war, it's not over. So right now, there's -- there are the pressure -- natural pressure. We see this in an oil, fuel. Today, I was talking about a consultant related to the war effect end more than 2 months, and this will compromise the matters of the macro nutrients. So it's premature in a way. Now we don't have a vision, a clear vision related to this war. Momentarily, there was pressure, cost pressure, but I don't know if that -- I don't know, how can I say it? And if this will keep stretching that much. Whether you want it or not, we have these external pressures related to cost that will impact, of course, the cost to the farmer, to the producer. Now you have a biological products and the capacity to the phosphorus, you have the nitrogenated ones when talk about soy, the index is 0 when you do all the application effectively with an Inoculant, the fixation -- biological fixations -- so everything that we're going to speak will be something that is just a pure guess. So that's what I think.

I think you answered everything. I think I don't have much to add, actually, to be honest.

Our next question comes from Pedro Fonseca, analyst from sellside from XP.

Two questions. The first one is related to mix. We've seen this change, a little bit of mix throughout the year, but the performance is very positive. I'd like you to update how is the mixed culture of the company after 2025? And what's the head for 2026? We've been talking about opportunities and oranges and other cultures, but soy is always the horse of the scale. As you get your guys' vision, what do you see as opportunities of the other kind of cultures in 2026? And the second point, I'd like to get an update with you guys. The guys come from a competitive scenario, Frizzo, his opening, he said about a lot of players that are going in and now one getting out. What you guys are foreseeing in the horizon? -- something that can change the competitive scenario? That's my question.

Okay, Pedro, talk about mix, ask about culture. Vittia, it does already work for a while already in other crops. You have to understand something that crop that from the moment, it's the sugarcane, for example, that's having a boom. Now the last couple of years, last time, there was a drop of the price of sugar. So sugarcane, for example, it's not under the golden years, this rule can be reverted. The oranges itself, which is a crop that it's very satisfory. Now it doesn't live on the best years that these crops, the last couple of crops. It's not so much the golden years and the coffee crops also. This culture is reaching a position that it's very comfortable with good prices and Vittia does this work. With the work that we're doing, we been very intense. It's to access these markets independently from the culture. It doesn't matter the kind of crop. We understand that we have potential to produce. We have the supply, the strong rationality, rationalization with cost, very interesting costs and Vittia doesn't stop. So that thing, it's work. You don't build this kind of work from day to night it work to time. But we're doing this -- but you can be absolutely sure about it. That's one of the greatest works that we do here in our company. When we talk about competitiveness, like Frizzo mentioned, there was this moment of expectation in the biological world, interruptive technology that it's getting bigger and bigger, so the market and [indiscernible] with all these things inside the market, people going in, some players that had an expectation that they had a greater expectation and that's not the current scenario. You know that we have inside our market companies and situation that are in a very hard situation now, delicate situation. I think the Euphoria is over. And from now on, things will be a bit different in this way. So that's our expectation. If you want to add something, Frizzo and Edgar.