Lavoro’s revenue for 2Q24 reached $618.7 million*, marking a 1% increase compared to the prior year period, as volume growth led by market share gains helped to offset continued significant input price deflationary pressures in crop protection and fertilizers across various operating regions
2Q24 gross profit stood at $103.0 million, reflecting a -17% decrease year-over-year, with gross margins contracting by -360 basis points to 16.7%, driven mainly by deflationary pressures affecting Ag retail distribution margins, partly mitigated by a more favorable segment mix, as Crop Care grew to represent 24% of Lavoro’s gross profit in 2Q24 (up from 16% in 2Q23)
Crop Care segment emerged as a highlight this quarter, with revenue increasing 26% to $72.8 million, and gross profit expanding 21% to $25.7 million driven by strong growth in specialty fertilizers
Net profit for 2Q24 was $1.9 million, compared to $35.3 million in the prior year period. This decline is attributed to a reduction in gross profit alongside increased SG&A and interest expenses
Adjusted EBITDA for the quarter was $40.1 million, a -48% decrease from the previous year, mainly due to significant input price deflation. Adjusted net profit stood at $2.6 million, down from $37.4 million in the prior year.
Lavoro’s financial outlook for FY2024 is unchanged relative to the projections provided last quarter
SÃO PAULO, Brazil, March 07, 2024 (GLOBE NEWSWIRE) — Lavoro Limited (NASDAQ:LVRO, LVROW)), the first U.S.-listed pure-play agricultural inputs retailer in Latin America, today announced its financial results for the fiscal second quarter of 2024, which ended on December 31, 2023.
Ruy Cunha, CEO of Lavoro, commented, “Our second-quarter results underscore our resilience in the face of challenging market conditions not seen in our industry for well over a decade. Our model is intact, as demonstrated by the performance of our Brazil Ag Retail operations that produced yet another quarter of strong unit volume growth and market share gains, which offset the impact of the deflationary environment in crop protection and fertilizer inputs. Supporting these share gains is momentum in attracting seasoned technical sales representatives (RTVs) to the Lavoro organization, which is illustrated by 25% sequential growth in RTVs to just over 1,040 sales reps in Brazil. We are in a great position and anticipate the positive contribution of these new hires to help drive growth next fiscal year.”
Mr. Cunha added, “Second quarter gross margins experienced sequential improvement, signaling the beginning of a path to recovery supported by stabilizing local input prices from the retail channel to farmers, and by the continued improvement in our average cost of goods sold, as we gradually cycle through our higher-cost inventory. Moreover, Crop Care’s performance in the quarter was a stand-out, with double-digit year-over-year growth in revenue and gross profit in spite of the market headwinds, and demonstrating yet again the synergies associated with the vertical integration with Lavoro Ag retail.
“Our market outlook remains consistent with our late January assessment. We still foresee a 25% decrease in Brazil’s retail inputs market for the 2023/2024 crop year, concluding in June 2024. Although price competition within the retail channel has broadly stabilized, disparities persist across Brazil’s various regions, influenced by the ongoing destocking of excess agrochemical inventories. We are encouraged by the recent favorable weather conditions, which have contributed to an uptick in farmer sentiment, evidenced by the strong start to the safrinha corn planting season—currently at 71%, exceeding the five-year average of 52%.”
* Financials presented in US dollars throughout this release are converted using the following average period USD/BRL exchange rate: 4.955 for 2Q24; 5.265 for 2Q23; the 1Q24 period was calculated using monthly exchange rates (4.801 for Jul-23, 4.904 for Aug-23, 4.937 for Sep-23); 1Q23 period was calculated (5.368 for Jul-22, 5.143 for Aug-22, 5.237 for Sep-22)
FY2Q24 Financial Highlights
Consolidated revenue for Lavoro in 2Q24 increased by 1% to $618.7 million, compared to the prior year period. Inputs revenue expanded 1% y/y to $610.8 million, as continued robust unit volume growth, contributions from recent M&A, and currency tailwinds, more than offset the input price deflationary environment.
Brazil Ag Retail segment revenue grew by 1% to $528.7 million in 2Q24, reflecting market share gains, unit volume growth, and the impact from the acquisitions of Referencia and Coram, which collectively contributed 6% to 2Q24 segment revenue. Latam Ag Retail segment revenue fell by -2% to $55.8 million in the quarter, as the increase in fertilizer sales volumes and the favorable impact of the Colombian Peso’s strength were outweighed by a decrease in crop protection category revenues. Crop Care revenue increased 26% y/y to $72.8 million, led by the strong performance of specialty fertilizers and adjuvants product categories, which more than offset declines in biologicals.
Consolidated gross profit decreased by -17% to $103.0 million in 2Q24, while gross margins contracted by -360 bps y/y to 16.7%. This reflects primarily lower distribution margins within our Brazil Ag Retail and Latam Ag Retail segments, higher freight costs as percentage of sales (an increase of 120 bps), and category mix-related headwinds in our Crop Care segment (with high margin biologicals underperforming in the quarter).
Crucially, the year-over-year trends in consolidated gross margins saw a notable improvement sequentially, improving from a decline of -840 bps in the first quarter of 2024 to a decrease of -360 bps in the second quarter. This improvement stemmed primarily from the reduction in the average cost of goods sold, as higher-cost inventory purchased at the past elevated prices is gradually cycled through and replaced with inventory procured at current lower prices.
Adjusted EBITDA decreased -48% y/y to $40.1 million in 2Q24, with Adjusted EBITDA margin contracting by -620 bps to 6.5%, reflecting the gross margin compression detailed above, along with a y/y increase in the SG&A (excluding D&A) as a percentage of sales, rising 300 bps to 11.3%. SG&A (excl. D&A) to sales increased due primarily to (i) higher personnel costs associated with newly hired RTVs that have yet to contribute to sales, and (ii) an increase in the allowance for expected credit losses.
Adjustment items excluded from Adjusted EBITDA increased by $1.5 million to $2.4 million for 2Q24, due primarily to higher stock-based compensation expense (+0.5 million), and an increase in related-party consultancy services expenses in 2Q24 (+$0.9 million).
Adjusted net profit in 2Q24 was $2.6 million, a decline of -$34.8 million over the prior year quarter, driven mainly by lower Adjusted EBITDA (-$37.4 million), higher financial costs (-$5.4 million) due to higher interest expense on trade payables, partially offset by a positive contribution from income tax (+11.0 million).
Consolidated Results (USD)
2Q23
2Q24
Chg. %
1H23
1H24
Chg. %
(in millions of US dollars)
Revenue by Segment
611.7
618.7
1
%
1,048.5
1,101.8
5
%
Brazil Ag Retail
524.8
528.7
1
%
883.1
940.6
7
%
Latam Ag Retail
57.0
55.8
(2
)%
123.7
122.1
(1
)%
Crop Care
57.7
72.8
26
%
93.7
108.5
16
%
Intercompany eliminations1
(27.8
)
(38.6
)
(52.0
)
(69.4
)
Revenue by Category
611.7
618.7
1
%
1,048.5
1,101.8
5
%
Inputs revenue
606.7
610.8
1
%
1,021.2
1,047.4
3
%
Grains revenue
5.0
7.9
57
%
27.3
54.4
99
%
Gross Profit
123.7
103.0
(17
)%
214.4
162.6
(24
)%
Brazil Ag Retail
99.7
73.3
(27
)%
169.1
108.9
(36
)%
Latam Ag Retail
11.5
9.9
(14
)%
21.0
19.1
(9
)%
Crop Care
21.3
25.7
21
%
38.1
41.2
8
%
Intercompany
(8.8
)
(5.9
)
(13.7
)
(6.6
)
Gross Margin
20.2
%
16.7
%
(360) bps
20.5
%
14.8
%
(570) bps
Gross Margin (% of Inputs revenue)
20.4
%
16.9
%
(350) bps
21.0
%
15.5
%
(550) bps
SG&A (excl. D&A)
(50.5
)
(69.7
)
38
%
(102.3
)
(125.0
)
22
%
Other operating income (expense)
3.4
4.4
6.0
4.4
EBITDA
76.6
37.7
(51
)%
118.2
42.0
(64
)%
(+) Adjustment items
0.9
2.4
3.7
9.3
Adjusted EBITDA
77.5
40.1
(48
)%
121.9
51.3
(58
)%
Brazil Ag Retail
64.3
26.7
(58
)%
97.4
30.9
(68
)%
Latam Ag Retail
7.1
4.7
(34
)%
11.5
7.8
(32
)%
Crop Care
15.0
16.2
8
%
26.8
21.7
(19
)%
Corporate / Intercompany
(8.8
)
(7.4
)
n.m.
(13.7
)
(9.2
)
n.m.
Adjusted EBITDA Margin %
12.7
%
6.5
%
(620) bps
11.6
%
4.7
%
(700) bps
Adjusted EBITDA Margin (% of Inputs)
12.8
%
6.6
%
(620) bps
11.9
%
4.9
%
(700) bps
Share of profit of an associate
–
(0.2
)
–
(0.4
)
D&A2
(7.0
)
(7.0
)
(15.5
)
(17.3
)
Finance income (costs)
(31.9
)
(37.3
)
(60.0
)
(63.3
)
Income taxes, current and deferred
(2.4
)
8.6
7.8
26.3
Net profit (loss)
35.3
1.9
(95
)%
50.4
(12.6
)
n.m.
(+) Adjustment items
3.2
1.2
6.3
9.9
(+) Income tax impact of adjustments
(1.1
)
(0.4
)
(2.2
)
(3.4
)
Adjusted net profit (loss)
37.4
2.6
(93
)%
54.6
(6.1
)
n.m.
1 Intercompany eliminations represent sales between Crop Care and Brazil Ag Retail
2 Depreciation & amortization, which includes the fair value adjustment on inventory sold from acquired companies, a non-cash expenses resulting from purchase price allocation of past acquisitions
Consolidated Results (BRL)
2Q23
2Q24
Chg. %
1H23
1H24
Chg. %
(in millions of Brazilian reais)
Revenue by Segment
3,220.2
3,065.9
(5
)%
5,506.1
5,431.8
(1
)%
Brazil Ag Retail
2,763.0
2,619.9
(5
)%
4,637.8
4,637.8
0
%
Latam Ag Retail
300.3
276.3
(8
)%
649.6
600.5
(8
)%
Crop Care
303.5
360.8
19
%
491.5
535.8
9
%
Intercompany eliminations
(146.6
)
(191.1
)
(272.8
)
(342.3
)
Revenue by Category
3,220.2
3,065.9
(5
)%
5,506.1
5,431.8
(1
)%
Inputs revenue
3,193.7
3,026.7
(5
)%
5,363.0
5,166.6
(4
)%
Grains revenue
26.5
39.2
48
%
143.1
265.2
85
%
Gross Profit
651.1
510.6
(22
)%
1,125.3
803.9
(29
)%
Brazil Ag Retail
525.1
363.2
(31
)%
887.6
539.5
(39
)%
Latam Ag Retail
60.5
49.2
(19
)%
110.5
93.9
(15
)%
Crop Care
112.0
127.4
14
%
199.5
203.3
2
%
Intercompany
(46.5
)
(29.2
)
(72.2
)
(32.8
)
Gross Margin
20.2
%
16.7
%
(360) bps
20.4
%
14.8
%
(560) bps
Gross Margin (% of Inputs revenue)
20.4
%
16.9
%
(350) bps
21.0
%
15.6
%
(540) bps
SG&A (excl. D&A)
(265.9
)
(345.3
)
30
%
(536.8
)
(615.4
)
15
%
Other operating income (expense)
18.1
21.6
31.7
21.9
EBITDA
403.3
186.8
(54
)%
620.2
210.4
(66
)%
(+) Adjustment items
4.9
12.1
19.7
46.2
Adjusted EBITDA
408.2
198.9
(51
)%
640.0
256.7
(60
)%
Brazil Ag Retail
338.3
132.3
(61
)%
511.4
155.3
(70
)%
Latam Ag Retail
37.4
23.1
(38
)%
60.5
38.4
(37
)%
Crop Care
79.0
80.2
1
%
140.4
108.4
(23
)%
Corporate / Intercompany
(46.5
)
(36.7
)
n.m.
(72.2
)
(45.4
)
n.m.
Adjusted EBITDA Margin %
12.7
%
6.5
%
(620) bps
11.6
%
4.7
%
(690) bps
Adjusted EBITDA Margin (% of Inputs)
12.8
%
6.6
%
(620) bps
11.9
%
5.0
%
(700) bps
Share of profit of an associate
(0.8
)
(1.8
)
D&A3
(37.1
)
(34.8
)
(81.6
)
(85.0
)
Finance income (costs)
(167.9
)
(184.7
)
(315.7
)
(313.6
)
Income taxes, current and deferred
(12.5
)
42.6
41.0
128.2
Net profit (loss)
185.8
9.2
(95
)%
263.9
(61.8
)
n.m.
(+) Adjustment items
16.9
5.7
33.5
49.1
(+) Income tax impact of adjustments
(5.8
)
(1.9
)
(11.4
)
(16.7
)
Adjusted net profit (loss)
197.0
12.9
(93
)%
286.0
(29.4
)
n.m.
3 Depreciation & amortization, which includes the fair value adjustment on inventory sold from acquired companies, a non-cash expenses resulting from purchase price allocation of past acquisitions
Segment Results
Brazil Ag Retail
Segment revenue of $528.7 million increased by 1% (a decrease of -5% in BRL terms) over the prior year period, reflecting unit volume growth in crop protection (up 46%), fertilizers (up 63%), specialty products (up 29%), and seeds (up 3%), which were offset by price deflation and negative product mix across all categories. Notably, revenue in seeds products decreased by -11% y/y, negatively impacted by the shift in timing of farmers purchasing decisions, and a decrease in the mix of higher technology corn seed varieties due to El Niño. Recently acquired Referencia and Coram together contributed 6% to 2Q24 Brazil Ag Retail segment revenue.
Gross margin contracted by -510 bps y/y to 13.9% in 2Q24, led by the impact of input price deflation across all product categories. Positively, gross margins saw a notable sequential improvement in y/y trends relative 1Q24, where gross margins had contracted by -1,070 bps. The sequential improvement was most pronounced in crop protection (a reduction of -260 bps y/y in 2Q24 vs. a reduction of -1,310 bps in 1Q24) and fertilizers (-280 bps in 2Q24 vs. -1,200 bps in 1Q24), as local input prices from the retail channel to farmers have stabilized, and as our average cost of goods sold continues to improve with the cycling of higher-cost inventory. Gross margins in seeds products sales declined sequentially (-430 bps y/y in 2Q24 vs. flat in 1Q24), due to the above-mentioned headwinds from mix.
Adjusted EBITDA experienced a 58% decrease to $26.7 million in 2Q24, with Adjusted EBITDA margins reducing by -720 bps to 5.0%, attributable to gross margins headwinds, in addition to increased SG&A expenses due to a higher allowance for expected credit losses and elevated personnel costs stemming from the recent hiring of RTVs which have yet to impact sales.
Brazil Ag Retail (USD)
2Q23
2Q24
Chg. %
1H23
1H24
Chg. %
(in millions of US dollars)
Inputs revenue
520.6
521.7
0
%
861.9
893.3
4
%
Grains revenue
4.2
7.0
66
%
21.3
47.3
122
%
Revenue
524.8
528.7
1
%
883.1
940.6
7
%
Gross Profit
99.7
73.3
(27
)%
169.1
108.9
(36
)%
Gross Margin
19.0
%
13.9
%
(510) bps
19.1
%
11.6
%
(760) bps
Gross Margin (% Inputs revenue)
19.2
%
14.0
%
(510) bps
19.6
%
12.2
%
(740) bps
Adjusted EBITDA
64.3
26.7
(58
)%
97.4
30.9
(68
)%
Adjusted EBITDA margin
12.2
%
5.0
%
(720) bps
11.0
%
3.3
%
(770) bps
Adjusted EBITDA (% Inputs revenue)
12.3
%
5.1
%
(720) bps
11.3
%
3.5
%
(780) bps
Brazil Ag Retail (BRL)
2Q23
2Q24
Chg. %
1H23
1H24
Chg. %
(in millions of Brazilian reais)
Inputs revenue
2,740.7
2,585.0
(6
)%
4,526.5
4,407.6
(3
)%
Grains revenue
22.3
34.9
56
%
111.4
230.3