Lavoro Limited

Greetings and welcome to Levaro's Fiscal First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tigran Karapetian, Investor Relations for Levaro. Thank you. You may begin.

Thank you for joining us today on Lavoro's fiscal 2024 first quarter earnings conference call. Our results ended September 2023. On today's call, our chief executive officer, Hui Cunha, and chief financial officer, Julian Garrido. 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 involves risk and uncertainties that could materially differ from actual events or those described in these 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, where the period ended June 30, 2023, filed with the SEC today, and our reports filed with the SEC time to time for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in the 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, among others. While the company believes that these non-IFRS financial measures will provide useful information for investors, the presentation of this information is not intended to be considered isolation or as a substitute for the financial information presented in accordance with the IFRS. Please refer to today's release for reconciliation of non-IFRS financial measures to the most comparable measure prepared in accordance with the IFRS. I'd like to now turn the call over to Rui Cunha, CEO.

Thank you, Tigran. I'll begin by touching upon the overall business landscape and the broader economic context after which Julian will delve into our financial highlights. And then I will return for some concluding remarks. So on our last quarter, for our first quarter, 2024 ended in September, Laboro delivered revenues of 483 million U.S. dollars, up 11% year over year, and up 3% in current local terms. Adjusted EBITDA was $11 million, declining 75% over the previous year quarter. Our revenue grew in the quarter in spite of the intense industry-wide deflationary pressures felt across major product categories. A strong volume growth led to market share gains, as well as currency tailwinds and growth in grains revenues more than offset the 40% to 50% average price declines in crop protection and fertilizer in Brazil. These deflationary pressures were a headwind to our profitability, in particular to ag retail in Brazil segments, where gross margins contracted by 10.7%, compared to previous year, to reach 8.7%. It translated to laborious adjusted EBITDA margins compressed to 2.3%. Let me take a moment to update you on the market environment. Since our last update, we saw an emergence of a disruptive El Nino phenomenon in Brazil. Severe drought conditions in many producing states, including Mato Grosso, have caused delays in planting, on this soybean crop and created challenges for the next crop as well. We now expect this to adversely impact the second corn crop with reduced planted acres, as well as seeing a portion of farmers opt for medium-tech corn seeds over high-tech alternatives, as well as curtail investment in specialty inputs such as biological solutions. We anticipate this impact to our second and third quarter results, both in Brazil, ag retail segment, as well as crop care segment. Next, let me provide you with some brief updates on our distribution margins recovery. In our last earnings call, we briefly expanded on the effects that ag input price variations have on our distribution margins. As a reminder, we explained that as a markup business, we are relatively agnostic to absolute price levels of input over time so long as they remain relatively stable. When prices are in uptrend or downward trend, our distribution margins are temporarily impacted given the three to four months inventory days causing the delay between COGS and average sales price adjusting. I refer to this as temporary given the fact that this trend eventually dissipates. Naturally, inventory turnover causes the inventory cogs to catch up to sales price and distribution margins revert to normalize to their normal average. So this, in a sense, what occurs is a normal environment when our margins are relatively stable. What is unusual about the last 12 months in Brazil is that the sheer steepness of the deflationary trend with crop protection and fertilizer prices declining 40% to 60% year-over-year over multiple quarters is a pressure that the agritale industry has not experienced since 2014. While our distribution margins for fertilizer and crop protection have indeed been gradually recovering, the pace of the improvement thus far has been below what we have expected. The destocking of excess agrochemical inventories is taking longer than expected. With all that said, we're updating our financial guidance to reflect the unanticipated impact of El Niño, as well as the slower recovering distribution margins. We're now forecasting adjusted EBITDA to be in the range of $80 to $110 million, while our guidance for revenues remains unchanged. With that, let me turn to Julien for some details on our financials.