Lavoro reports a $145 million loss but sees recovery ahead

Lavoro, considered one of Latin America's most prominent agricultural input distributors, has reported an adjusted net loss of $144.9 million for the 2023-2024 crop season. 

This marks a significant downturn from the previous season (2202-2023) when the company recorded an adjusted net profit of $30.9 million.

Despite a 5% revenue increase to $1.88 billion compared to the previous season, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) plummeted 64% to $53.3 million this fiscal year. According to the company's financial statement, gross profit declined 19%, from $332.9 million to $268.4 million.

The company reported year-end net debt of BRL371.6 million in Brazilian operations and BRL924.9 million in Latin America. While revenues from Brazilian retail operations accounted for $1.58 billion, Latin American operations (Colombia, Ecuador, and Uruguay) generated $237.8 million.

Revenue from input resale grew only 1% year-over-year, reaching $1.678 billion compared to $1.669 billion last year. Lavoro's CEO, Ruy Cunha, noted that the structural challenges of the 2023-2024 season were expected to impact the company's performance.

According to Cunha, it was one of the most challenging years in recent times, marked by global structural problems. The Brazilian agricultural sector faced particular difficulties, including commodity price drops, input price fluctuations, weather issues, and high interest rates.

Consultant Eduardo Lima Porto, director of LucrodoAgro Agricultural Economic Consulting, stated that Lavoro is "heavily indebted relative to its operational cash generation capacity, indicating a dangerous leverage level that could lead to insolvency."

To reassure investors, clients, and suppliers, Lavoro's CEO held a video call to assert that the leverage situation is not as severe as reported. According to Lavoro, considering the company's reported net debt and results data, the company's leverage stood at 3.5 times EBITDA at the end of this crop year.

Optimistic Outlook

Ruy Cunha stated that despite a challenging year for both agribusiness and Lavoro, marked by slower farmer purchasing patterns, he saw more apparent signs of profitability improvement. According to him, input inventories at agricultural retailers appear to have normalized, suggesting more stability in fertilizer and pesticide prices.

The executive does not expect margins to return to pandemic-era levels but anticipates significant improvement compared to the previous season. He emphasized that the input distribution company's focus now is "improving margins to be well-positioned when the cycle turns."

(Editing by Leonardo Gottems, reporter for AgroPages)