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Lavoro reports fiscal first quarter 2025 earnings resultsqrcode

Feb. 4, 2025

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Feb. 4, 2025

Lavoro
Brazil  Brazil
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Lavoro Limited (Nasdaq: LVRO, LVROW), the first U.S. listed pure-play agricultural inputs retailer in Latin America, announced its financial results for the fiscal first quarter of 2025, which ended on September 30, 2024.


Ruy Cunha, CEO of Lavoro, commented, ″Our 1Q25 results reflect a continuation of the trends observed in recent quarters across our operating segments, with strong growth in Crop Care, relative stability for Latam Ag Retail despite market headwinds, and gradual gross margin recovery in Brazil Ag Retail, which expanded by 350 basis points year-over-year.″


″While farmer sentiment and profitability projections continued to improve in Brazil, liquidity constrains in the sector, which were already significant, escalated considerably towards the end of the year. Judicial recovery events, including that of a major ag retailer, triggered a sharp increase in risk aversion among suppliers and financial institutions, leading to a significant tightening in inventory financing conditions for Lavoro and other industry peers.″


″As direct consequence, Lavoro’s commercial activity in Brazil was severely impacted by inventory shortages in key categories throughout November and December, two critical months for the first soybean crop. In early January, successful renegotiations with key suppliers helped partially ease these bottlenecks, though inventory replenishment and new farmer purchase order activity have yet to fully normalize. Thus, we are revising our FY2025 guidance to reflect these new developments.″


Mr. Cunha concluded. ″Looking ahead, as we navigate through these near-term disruptions, we remain committed to executing on the factors within our control and implementing strategic measures to ensure Lavoro is well-positioned to capitalize as early signs of end-market recovery continue to gain momentum. The cost-saving initiatives mentioned in the last earnings call around retail network optimization and fixed cost rationalization are now in motion, and we expect these measures to yield benefits starting in 2H25.″


1Q25 Financial Highlights


  • 1Q25 consolidated revenue decreased by -13% year-over-year (y/y) to R$2.05 billion reais (-24% in USD terms), reflecting a decline of -9% (-20% in USD) in Inputs revenue, and a fall of -52% (-57% in USD) in Grains revenue associated with our barter operations. At the segment level, Crop Care revenue increased by 68% y/y (+48% in USD) and Latam Ag Retail revenue increased by 4% y/y (-8% in USD), while Brazil Ag Retail revenue fell by -23% (-32% in USD), the latter being adversely impacted by lingering effects of last year’s inputs price declines and farmer liquidity constrains.


  • Consolidated gross profit grew by 10% to R$321.2 million in 1Q25 (-4% in USD), including growth from all three segments. Gross margins expanded 320 bps y/y to 15.6%, reflecting improvements in Brazil Ag Retail distribution margins related to better inventory cost positioning more than offsetting contraction in Crop Care, driven primarily by product mix. Gross margins as % of Inputs revenue improved 280 bps y/y to 16.5%, reflecting similar drivers.


  • Net loss was R$267.1 million in 1Q25, compared to R$71.0 million in the prior year quarter. The R$196.1 million increase was largely attributable to changes in deferred tax assets ($152.1 million contribution to net loss) and higher finance costs (R$60.7 million increase y/y), which more than offset gross profit improvement (R$27.9 million increase y/y). In USD terms, net loss was $48.2 million, compared to $14.5 million in 1Q24. Adjusted Net Loss was R$269.2 million, compared to Adjusted Net Loss of R$42.9 million in the prior year quarter, with similar key drivers.


  • Adjusted EBITDA decreased -5% to R$54.4 million, as higher SG&A expenses, driven by personnel costs and expired inventory provisions, more than offset the increase in gross profit. In USD terms, Adjusted EBITDA was $9.8 million, a decrease of -16% compared to 1Q24.


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1Q25 Segment Results


Brazil Ag Retail


  • Brazil Ag Retail segment revenue decreased by -23% y/y to R$1.55 billion in 1Q25 (-32% in USD terms). Segment Inputs revenue fell -19% y/y to $1.48 billion (-29% in USD), as high-single digits sales volume growth in crop protection and specialty products was more than offset by lower sales volumes in seeds, and price/mix headwinds. Regionally, Inputs revenue in North Cluster (primarily Mato Grosso) fell -37% y/y, reflecting stricter internal credit policies, and a heightened competitive environment. South Cluster and East Cluster, which faced lesser impact from last year’s El Nino, saw Inputs revenue declines of -6% y/y and -7% y/y, respectively.


  • Gross profit grew +7% to R$189.0 million (-6% in USD) in 1Q25, with gross margin expanding 350 bps to 12.2% and Gross Margin (% of Inputs) rising 310 bps to 12.8%. This improvement was primarily driven by stronger distribution margins in crop protection and fertilizers, supported by improved inventory cost positioning coupled with a stable inputs pricing environment on a sequential basis.


  • Adjusted EBITDA decreased -6% to R$45.1 million (-17% in USD), as gross profit expansion was more than offset by higher SG&A expenses. SG&A expense increase was largely attributable to higher expired inventory provisions, and higher personnel costs, partially offset by lower allowances for expected credit losses.


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Latam Ag Retail


  • Latam Ag Retail segment revenue increased 4% to R$337.0 million reais (-8% in USD terms) in 1Q25, supported by the 12% y/y appreciation of the Colombian peso relative to the Brazilian real. Lack of rains delayed the start of the planting season, impact sales in specialty products.


  • Segment gross profit increased by 7% to R$47.8 million (-6%), with gross margins expanding by +40 bps to 14.2% with the incremental benefits of rebates more than offsetting adverse product mix.


  • Adjusted EBITDA decreased by -32% to R$10.4 million (-40% in USD), as increase in gross profit was more than offset by higher allowances for credit provisions (R$3.5 million increase y/y) and increased personnel costs.


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Crop Care


  • Crop Care revenue increased by 68% y/y to R$293.7 million reais in 1Q25 (+48% in USD terms), driven by strong performance for Union Agro (specialty fertilizer) and Perterra (private-label post-patent agrochemicals). Union Agro's 49% y/y revenue growth was led by robust commercial execution and higher external sales. Perterra revenue grew by more than R$40 million relative to 1Q24, with the increase supported by enhanced integration in sales and operations planning with Brazil Ag Retail, and from new product registrations broadening its product portfolio. These gains were partially offset by price/mix pressures in adjuvants and biologicals.


  • Segment gross profit rose 11% y/y to R$84.3 million (-2% in USD), while gross margins contracted from 14.6% percentage points to 28.7%. Thie margin contraction was driven in large part by changes in product category mix, as stronger sales in specialty fertilizers, mineral oils, and post-patent agrochemicals weighed against higher-margin product categories such as biologicals and adjuvants. Additionally, residual impact from last year’s price declines, coupled with rising raw material costs linked to the depreciation of the Brazilian real, contributed to margin pressure.


  • Adjusted EBITDA grew +24% to R$35.9 million (+9% in USD), reflecting increased gross profit and other operating income, partially offset by higher personnel expenses related to growth initiatives.


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Revised Fiscal Year 2025 Consolidated Outlook


Lavoro is revising its guidance for FY2025 as a result of recent disruptions caused by the sudden tightening of inventory financing conditions impacting our Brazil operations.


Lavoro’s outlook for FY2025 consolidated revenue is now projected to range between R$6.50 billion to R$7.50 billion reais, and for consolidated Inputs revenue to range between R$5.90 billion and R$6.90 billion.


In US dollar terms, FY2025 consolidated revenue is now projected to range between $1.12 billion to $1.28 billion, and for consolidated Inputs revenue to range between $1.02 billion and $1.18 billion. Embedded in this new forecast is an assumption for an average USD/BRL exchange rate of 5.90 for the remaining 3 quarters of FY2025.


Finally, Lavoro no longer expects its Adjusted EBITDA to grow relative to FY2024.


Source: Lavoro

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