Lavoro Ltd. Q1 FY2025 earnings call

• Crop Care continued to show double-digit growth in revenue, gross profit, and adjusted EBITDA.
• Brazil Ag Retail faced challenges from input price deflation, revenue decline due to credit policy tightening, and inventory shortages in key product categories.
• Market landscape changed with favorable weather improving farmer profitability, but liquidity constraints and supplier inventory finance tightening caused issues.
• Store consolidation initiatives in Brazil Ag Retail to optimize network and reduce fixed costs, expected to materialize in the second half of the fiscal year.

Consolidated revenue for Lavoro’s fiscal 2025 first quarter totaled BRL2.05 billion, a 13% year-over-year decline. Crop Care segment saw a 68% revenue increase to BRL293.7 million. Brazil Ag Retail revenue declined 23% to BRL1.55 billion. Latam Ag Retail revenue increased 4% to BRL337 million. Gross profit was BRL321.2 million, up 10%, with gross margin at 15.6%. Net loss was BRL267.1 million, wider than prior year.

• Consolidated net revenue expected between BRL6.5 billion and BRL7.5 billion for fiscal 2025.
• Imports net revenue expected between BRL5.9 billion and BRL6.9 billion.
• No expected adjusted EBITDA growth in full year 2025 compared to 2024, due to supply constraints and timing issues.

• Liquidity constraints in the agri business sector leading to low cash-based input purchases.
• Tightening of inventory financing conditions due to judicial reorganization of a major ag retailer.
• Inventory shortages in Brazil retail operations during critical windows for soybean crop due to supplier inventory finance tightening and farmer cash flow issues.

Q: About updated guidance for 2025 and 2Q impact, Ruy Cunha mentioned main factor is input timing and supply delays affecting second half.

A: Ruy Cunha said first quarter was good, but delays in getting inventories for soy crop delivery impacted second half, with normalization not confirmed yet.

Q: On sentiment, debottlenecking in January and OEM willingness vs farmer cash conversion, Ruy Cunha said farming income improvement, strong soy and corn crops, dollar appreciation helping farmers sell, and input manufacturers normalizing after excess inventory.

A: Ruy Cunha explained farming income improving, strong crop prospects, dollar impact, and better mood for input manufacturers as inventory issues normalized.

Q: On precipitation, government financing, and retail space, Ruy Cunha said government not likely to provide immediate financing, improvement from farmer profitability, and focus on consolidating position rather than expanding retail space.

A: Ruy Cunha stated government not expected to provide quick financing, improvement from farmer profitability, and priority on protecting client base and improving operations.

Q: On geopolitics and farmer sentiment, Ruy Cunha discussed impact of US tariff changes on Brazilian farmers, seeing positive news for commodity prices and exports.

A: Ruy Cunha said geopolitical changes like US tariffs on Mexico and Canada could positively impact Brazilian farmers' commodity prices and exports.