AgroGalaxy reports significant revenue decline in Q2 2024

AgroGalaxy Participações S.A. (″AgroGalaxy″ or ″Company″) (B3: AGXY3) releases its results for 2Q24 and 1H24. The comments included here refer to the consolidated results that were prepared in accordance with the standards issued by the Securities and Exchange Commission (CVM) and the pronouncements, interpretations and guidelines issued by the Accounting Pronouncements Committee (CPC) and are in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Financial information, unless otherwise indicated, is presented in thousands of reais, and comparisons are relative to 2Q23, 1H23 and LTM 2Q23. Due to rounding figures, sums of accounts may differ.

AgroGalaxy Highlights

• 30% growth in the order portfolio within the periods of June and July 2024 compared to the same period of 2023.

  
  

• Record in Barter operations – Company's strategy of prioritizing the sale of package traded in grains. Significant growth in Barter orders; 377 thousand tons (2Q24) vs. 105 thousand tons (2Q23). Currently, Barter operations represent 42% of AgroGalaxy's business.

  
  

• Net revenue: R$ 1.1 billion (-42%) in 2Q24: mainly due to the drop in the volume of inputs (-48%) and fertilizer cut-off of around R$90 million greater than 2Q23.

  
  

• Expansion of 2.9 p.p. in gross margin from inputs in 2Q24 (19.5%) and 1.1 p.p. in 1H24 (16.5%).

  
  

• Sales mix improvement: greater share in Specialties (17.0% of the mix, +7.5 p.p.) in 2Q24.

  
  

• SG&A (ex-D&A and PDD): reduction of 17% (-R$26 million) in 2Q24 vs. 2Q23 and 22% (-R$182 million) in LTM2Q24 vs. LTM2Q23, in line with the new organizational model, aiming to face market volatility.

Commenting on the results for 2Q24 and 1H24, Axel Labourt, AgroGalaxy CEO said:

"In another cycle of results, I come here to present some impressions of the market and how we are operating. We continue to go through a challenging time in the agribusiness sector and our performance reflects the difficulties faced by the entire market. The effects of the changes we made in recent months, in search for more efficiency and agility, have become more evident, demonstrating that they were timely and necessary decisions to continue supporting farmers in this still adverse scenario.

Even in historically less favorable conditions, we had a 30% growth in the order portfolio between June and July 2024 compared to the same period in 2023, which gives us good insights for the coming periods.

Additionally, we achieved a record in barter operations, a crucial priority for our Company, with a significant increase in orders. Barter operations now represent 42% of AgroGalaxy's business, totaling 377 thousand tons in the quarter, compared to 105 thousand tons in the same period last year. This is a healthy sign for agribusiness, because farmers are locking operational costs, bringing more security to the entire chain in the next harvest.

Our input gross margin expanded significantly, reaching 19.5% in the second quarter, an increase of 2.9 percentage points. This expansion demonstrates the effectiveness of our strategy in focusing on the mix of specialties, which traditionally bring greater gross margin.

We remain strong in our commitment to reducing general and administrative expenses to maintain our operational efficiency, recording a 17% reduction in the period. These measures are essential to face market volatility.

The drop in production of the 2024 interim harvest, impacted by adverse weather conditions in some States, the fluctuation in the price of inputs in general and the still present effects of the turn of the cycle in the 22/23 harvest, translate into farmers investing in a selective and prudent way. These factors, naturally, impacted our performance in the period.

Our results are in line with the natural seasonality of agribusiness and do not reflect some promising signs already visible in the 24/25 harvest overview. From the middle of the 2nd quarter onwards, we noticed a substantial increase in the pace of orders for the 24/25 Harvest, even higher than the average for the previous harvest. This acceleration in order portfolio and the increase in barter business, the greater probability of a favorable climate for crop development and a more stable exchange ratio, in line with historical averages, are clear signs of recovery that fuel our optimism.

We will continue leveraging our strengths, such as our broad geographic coverage, focus on growth in key segments such as specialties and seeds, synergy with the grain origination business, partnership with the best suppliers in the market and discipline in seeking greater operational efficiency.

Here at AgroGalaxy, we are dedicated and prepared to transform current challenges into opportunities, to grow with value and thrive with our customers."

Seasonality (Input)

The agribusiness industry is subject to significant seasonality over the year, especially given the crop cycles that depend on specific climate conditions. Brazil has unique climate conditions compared to other countries producing agricultural commodities, contributing to the plantation of two to three crops in the same area per year.

Thus, considering that the activities of the Company’s customers are directly related to the cycles of the crops, which are subject to seasonality issues, revenues from input are also subject to significant seasonality.

The seasonality of the crops also implies the seasonality of the gross profit, calculated at different basis for the fiscal year, which may cause a significant seasonal effect on the operating results calculated during the separate quarters of the fiscal year.

Highlights

1 Adjusted Gross Profit: it considers: (a) gains or losses from changes in the fair value of commodities; (b) exchang ratee gains or losses; (c) negative impact of the cash effect related to rent payments; and (c) reversal of the effect of unusual expenses. 2 Adjusted EBITDA and Profit: Exhibit II table presents the adjustments made.

This media release, financial highlights, and more financial data are available in PDF format.

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