Lavoro announces nearly 100% profit downturn in Q2 2024

Date:04-05-2024

Brazilian agricultural input distribution company Lavoro announced a 95% decline in its net profit in the second quarter of the fiscal year 2024, which corresponds to the period between October and December 2023.

According to the company, the gross margin, measured before EBITDA (earnings before interest, taxes, depreciation, and amortization), dropped from around 20% to just under 17%. Lavoro's EBITDA indicator was further impacted by pricing conditions for inputs sold both in Brazil and Latin America. 

Revenue stood at $618 million, but the lower prices practiced in the latter part of last year eroded the gross margin. However, other factors contributed to the EBITDA margin decreasing from nearly 13% in the second quarter of the fiscal year 2023 to 6.5% in the same period of fiscal year 2024. EBITDA itself also halved in the annual comparison, to just over $40 million.

According to Lavoro, this decline is justified by higher expenses related to the hiring of field technicians, as well as provisions to prevent future losses from defaults. With this entire scenario, Lavoro's net profit dropped from $35 million in the second fiscal quarter of 2023 to less than $2 million in the same period of 2024, a decrease of 95%. In the accumulated result for the first half of the 23/24 harvest, the company records a loss of $12.6 million, compared to a profit of over $50 million in the previous period.

Distribution of inputs in Brazil accounts for 85% of Lavoro's revenues, and in the second quarter of the harvest, gross profit fell by 27%, while in Latin America, the decline was 14%. 

Lavoro highlights the seed category as the most problematic in the second quarter of the 23/24 harvest, with a 3% increase in volume but an 11% price decrease.

The positive highlight of Lavoro's balance sheet was the segment called "Crop Care," which is the company's production of agricultural inputs. Despite having a small share of total revenue, the area saw a 26% increase in revenue, a 21% increase in gross profit, and an 8% increase in EBITDA.

The special fertilizers category was the biggest contributor, with a 55% increase in revenue. The acquisition of Cromo Química, which was completed in June last year, is already reflected in the results, as sales doubled after the inclusion of adjuvants and performance enhancers manufactured by the company in Lavoro's network. Within the segment, the downside was the sale of biologicals, which declined by 19% in a year.

(Editing by Leonardo Gottems, reporter for AgroPages)