Agri-inputs crisis: Agrofito is the latest distributor to enter into extrajudicial debt recovery

The distributor Agrofito Insumos Agrícolas, a company with more than 48 years of experience in Brazilian agribusiness, has announced to the market that its Out-of-Court Reorganization has been officially ratified. According to the company, this path consolidates ″another relevant step within a solid strategy to strengthen the company.″

″The decision to pursue Out-of-Court Reorganization, instead of the traditional Judicial Reorganization—which has become common among companies in the sector—was the result of a thorough study, conducted with transparency and responsibility, reaffirming Agrofito’s commitment to its governance and to all of its partners. This also marked Agrofito’s pioneering spirit in this regard among all other companies in our input distribution sector,″ stated Agrofito Insumos Agrícolas’ CEO, Francisco Toledo.

Throughout the ratification process, said Toledo, Agrofito maintained its investment pace and continued spending in innovation, technology, and structure. Toledo cites, as examples, the opening of new stores and the construction of its Distribution Center, as well as workforce training initiatives.

According to Agrofito’s Toledo, these actions ″reinforce the belief in the future of agribusiness and the value of long-term relationships. The ratification of the Out-of-Court Reorganization, therefore, represents a milestone in strategic reorganization, keeping our operations healthy, with a focus on excellent service to our clients, partners, and suppliers. We remain steadfast in our purpose to deliver agricultural solutions with responsibility, proximity, and trust.″

Agrofito Insumos Agrícolas operates in the Brazilian states of São Paulo, Goiás, and Tocantins, with a technical and commercial presence also in the irrigation segment, working with both localized systems and central pivots. Some of the company’s suppliers are FMC, ADAMA, MaxCrop, Microxisto, LG, Netafim, Spraytech, Irritech, and Ducem.

Agri-inputs Crisis

Brazilian agribusiness has been experiencing financial turbulence affecting entire supply chains within the sector. Companies involved in the resale and distribution of inputs, in particular, have suffered from a high level of defaults by input suppliers, creating a domino effect with further defaults and repeated requests for judicial or out-of-court reorganization. Agrofito claims it was also a victim of severe default and accumulated an estimated debt of BRL 250 million (USD 47 million).

In addition, the Brazilian company cites factors, including situational instability, such as the drop in commodity prices, unpredictable weather events, high input costs, and inventory accumulation, which affected the balance of accounts and, consequently, stability. ″It was a situation caused by external factors, which upset the company’s financial equilibrium. Since our founding in 1977, we have never faced such a difficult situation,″ noted Toledo.

In the face of such a scenario, Agrofito’s CEO reveals that the company sought a law firm specializing in this type of matter. Together, they devised a solution for debt payment, as well as economic restructuring. ″We know that the Agro sector presents many challenges. If it’s not drought, it’s flooding; if it’s not commodity or input prices, it’s interest rates that render previously viable projects unfeasible. Fortunately, we have a highly organized and committed internal management team, which allows us to have all the figures at hand and anticipate problems in advance,″ noted Toledo.

With the numbers in hand and legal challenges being addressed to avoid compromising operational viability, the company began meeting with creditors to explain the situation and propose alternative payment schedules, as well as financing options to strengthen operations. With creditor approval of the plan, the out-of-court reorganization has finally been ratified.

″It’s necessary to formalize this process in court so that order is maintained and the will of the majority of creditors is respected. The plan must meet the law's formal requirements and, once those are met, the judge proceeds with ratification, which amounts to approval and legal backing for the plan. From that moment on, the plan’s rules prevail for all creditors listed in it, allowing the company to recover,″ said attorney Ricardo Dosso, a specialist in corporate restructuring and a partner at Dosso Toledo Advogados.

According to Dosso, whose firm handled the request for ratification of Agrofito’s plan, this type of request has multiplied in the agribusiness world. There are numerous factors contributing to losses, and the only viable path is to seek debt renegotiation. This was the case for Agrofito, which aims to honor its commitments by restructuring debts and strengthening the company’s foundations.

″We know that the most fragile link in this vast agribusiness chain is the distributor. They are the ones who obtain the lowest returns in the sector, assume the highest risks, and are responsible for most of the transactions with producers. In our strategic planning, we foresee an increase in sales of specialty, biological, and irrigation products, as well as services offered directly to the producer. These products and services, unlike chemical crop protection, have grown significantly in the market, bringing more profitability and sustainability to the sector,″ added Toledo.

(Editing by Leonardo Gottems, reporter for AgroPages)