Lavoro Limited

Welcome to Levero's fiscal fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded and a replay will be made available on the company's investing relations website at ir.leveroagro.com. I'll now turn the conference over to Tigran Karapetian, Head of Investor Relations. Thank you. You may begin.

Thank you for joining us today on the World's Fiscal 23 Fourth Quarter Earnings Conference Call for results ended June 30th, 2023. On today's call are Chief Executive Officer Luis Cunha, Chief Financial Officer Julian Garrido, and Chief Strategy Officer Gustavo Modonesi. The company has provided a supplemental earnings presentation on its investor relations website at ir.lavoroagro.com that may be helpful in your analysis of the quarterly performance. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results in operations and financial position industry, and business trends, business strategy, and market growth, among others. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that may differ materially from actual events or those described in the forward-looking statements. Please refer to the company's registration statement on Form F1 filed with the SEC on March 23, 2023, or our report on Form 20F for the period ended June 30th, 2023 followed the SEC today. And other reports fall from time to time with the SEC for detailed discussions of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. Please note on today's call, management will refer to certain non IFRS financial measures, including adjusted EBITDA, adjusted EBITDA margin, pro-forma and pro-forma margin, among others. While the company believes these non-IFRS financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or to substitute for the financial information presented in accordance with IFRS. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with the IFRS. I'd like now to turn the call over to Rui Cunha, CEO.

Thank you, Tigran. Good morning. I'll begin by touching upon the overall business landscape and the broader economic context, after which Julianne will delve into our financial highlights and outlook. Stav will then update us on our M&A pursuits and strategic pathways, and I'll return for some concluding remarks. First talking about fiscal year 23. For the full fiscal year 23 ending in June, Lavoro delivered revenue of $1.8 billion and adjusted EBITDA of $150 million. This represents an increase of 24% and 64% respectively from previous year. Notably, our crop care segment once again was a significant growth driver as we saw revenues and gross profit expand by 94% and 138% respectively. This growth is attributed to strong demand for existing biopesticides and specialty fertilizer products, contribution from successful new product introduction, as well as continual evidence of strong cross-selling synergies with our Brazil ag retail operations, where crop care continues to gain shelf share. Crop care now accounts for nearly 19% of our adjusted EBITDA in fiscal year 23, a jump from 8% the previous year, and we anticipate this trend of increasing contribution needs to continue. Moving on to our 4Q results ended in June. our revenue and gross profits rose by 17% and 27% year over year, respectively. This was achieved despite more challenging than expected market conditions in the final six weeks of the quarter, conditions which have persisted in the first quarter of this year and have similarly weighted on our performance. Let me take a few minutes to address the market environment in Brazil as we see them. In our last earnings call, we pointed out the price volatility in commodities like soybean and corn coupled with declining fertilizer and agrochemical prices as posing challenges to our Brazil operations. In line with recent public commentary from our peers and suppliers, we saw a further worsening in the pricing trends in key categories such as herbicides and fertilizers, a significant global pricing decline in those products were exacerbated by excess channel inventories in some categories, herbicides in particular. We believe that the gradual process of clearing this excess inventory will take until the end of calendar 2023 to unfold, with variations depending on the sub-region and product. Nevertheless, We're now observing signs of stabilization and pockets of improvement in some areas, indicating that the worst of the impact is now behind us. Taking the full picture into account, our expectations for the retail egg input business in Brazil is to see overall shrinkage of approximately 20%. for the 2023-2024 crop year, which corresponds to our fiscal year 2024. Our view is that the fundamentals long-term secular growth drivers from Brazil's agri-tail segment have not changed. What we have been witnessing in the past few quarters is the normalization of input prices that overshot in 2021-2022 as a result of temporary factors that have now waned, namely the impact of COVID-led plant shutdowns on Chinese agrochemical production and the effects of the war in Ukraine. These price adjustments have a high impact for agribusiness depending on where you sit in the value chain. Plus, ag input retailers that act as trusted advisors to small and medium-sized farmers and monetizing our services by selling inputs to them were relatively agnostic of prices of inputs over time, so long as they are relatively stable. Our distribution gross margins are fairly similar irrespective of the baseline of input prices. With that said, input price declines do act as temporary headwinds to our distribution margins while the deflationary period remains intact, with these detrimental effects subsiding as the trend dissipates. As detailed during our NS day, the key drivers for our retail operations have historically been and do remain, first, farmers' profit expectations of future crops, which directly impact their willingness to invest in inputs and technology to optimize their crop yields. And second, planted acreage expansion. As farmers' optimism about profits and upcoming crop season increases, so does their per acre spent in inputs in order to maximize crop yields and thus profits. While the instability in corn, soybean, and input prices of the past few months have increased the volatility in farmers' future profit expectations, we believe this is mainly manifesting in the form of delaying their input purchase decisions to the last possible minute, as opposed to outright demand erosion. More importantly, thus far in first Q24, we have been seeing strong volume growth, albeit more than offset by price declines. And we believe this volume increase is only partially explained by our market share gains. The deflationary periods that we're currently experiencing is sharper than we've seen in a few years, with agrochemicals and fertilizer prices down strong double digits year over year. Nevertheless, we view this just as a temporary effect that we expect should not persist beyond the end of this current fiscal year, ending in June 24, and should not affect our long-term growth algorithm. Management focus remains primarily on the conditions we can affect, namely helping our farmers' customers to improve their productivity with our products and services, unit volume growth, and market share gains. Over time, we believe our financial results will reflect our operating performance. With that said, I'll pass on to Julian for further details of our financial results.