NASDAQ:LVRO Lavoro Q1 2024 Earnings Report $2.78 -0.15 (-4.95%) Closing price 04/25/2025 03:58 PM EasternExtended Trading$2.90 +0.12 (+4.13%) As of 04/25/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Lavoro EPS ResultsActual EPS-$0.07Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ALavoro Revenue ResultsActual Revenue$483.10 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ALavoro Announcement DetailsQuarterQ1 2024Date1/24/2024TimeN/AConference Call DateWednesday, January 24, 2024Conference Call Time5:00PM ETUpcoming EarningsLavoro's Q3 2025 earnings is scheduled for Monday, June 2, 2025, with a conference call scheduled on Friday, May 30, 2025 at 12:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Lavoro Q1 2024 Earnings Call TranscriptProvided by QuartrJanuary 24, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Greetings, and welcome to the Lovaro's Fiscal First Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tigran Karapishan, Investor Relations for Lovaro. Operator00:00:27Thank you. You may begin. Speaker 100:00:31Thank you for joining us today on Lovaro's fiscal 2024 Q1 earnings conference call for results ended September 2023. On today's call are Chief Executive Officer, Jui Quina and Chief Financial Officer, Julian Garrido. The company has provided a supplemental earnings presentation on its Investor Relations website atir.lavorogro.com and 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 and 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 risk and uncertainties that could materially differ from actual events or those described in these forward looking statements. Speaker 100:01:33Please refer to the company's registration statement on Form F-one filed with the SEC on March 23, 2023, or our report on Form 20 F for 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 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, 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 contained in isolation or as a substitute for the financial information presented in accordance to 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 Ruiz Konya, CEO. Speaker 200:02:36Thank you, Chigran. 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 fiscal quarter, for our Q1 2024 ended in September, Lavoro delivered revenues of US483 million dollars up 11% year over year and up 3% in current local terms. Adjusted EBITDA was $11,000,000 declining 75% over the previous year quarter. Speaker 200:03:24Our revenue grew in the quarter in spite of the intense industry wide deflationary pressures fell across major product categories, as 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 Lavoro's adjusted EBITDA margins compressed to 2.3%. Now let me take a moment to update you on the market environment. Since our last update, we saw an emergence of El Nino phenomenon in Brazil. Speaker 200:04:28Severe drought conditions in many producing states, including Mato Grosso have caused delays implanting on this soybean crop and created challenges for the next crop as well. We now expect this to adversely impact the 2nd corn crop with reduced planted acres as well as seeing a portion of farmers up 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 2nd 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 effect that ag input prices variations have on our distribution margins. Speaker 200:05:33As 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 an uptrend or downward trend, our distribution margins are temporarily impacted given the 3 to 4 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. Speaker 200:06:32What 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 ag retail 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 Nino as well as these lower recovery in distribution margins. We're now forecasting adjusted EBITDA to be in the range of $80,000,000 to $110,000,000 while our guidance for revenues remains unchanged. Speaker 200:07:33With that, let me turn to Julian for some details on our financials. Speaker 300:07:40Thanks, Wu. I'll begin by covering our consolidated financial results for the fiscal Q1 2024, which ended on September 30, 2023. And providing additional details regarding our revised full year fiscal 2024 guidance. Let me start with the Q1. Consolidated revenue rose by 11% to $482,000,000 as Louis has mentioned. Speaker 300:08:11In constant currency terms, the revenue increase was 3%. Green Goods revenue increased 5% with volume growth more than offsetting pricing declines. Revenue increased 109%, driven by greater desire by our customers for entering the barter transactions. Looking at revenue by segment, Brazil Retail saw revenue increasing by 15%, reflecting the improved sales volumes of crop protection, fertilizers and specialty product categories, which increased 54%, 53% and 33%, respectively. This more than offset the decline in average sales price that we elaborated on before. Speaker 300:09:06Avocado gained share in the quarter, driven by good execution from our local commercial teams. The contribution from recently acquired the Ceferanes in the south of Brazil contributed roughly 2% to the overall revenue growth for the segment. Now talking about Latin retail revenue, it increased by 1%, 9% in Colombian peso terms relative to the prior year quarter, landing at 66.3 dollars The decline was primarily driven by the pricing headwinds to fertilizers as well as supply shortages of corn feeds from a key supplier, which resulted in lost revenue opportunity in 'nineteen to just over $2,000,000 for the quarter. Actions have already been put in place to add new suppliers to mitigate impact for the rest of the year. In addition, our LatAm business continued to suffer from the impact of the rupture of supply of Paraquat, top leading herbicide in Colombia, from a key supplier. Speaker 300:10:15The year over year headwind from Paraquat amounted to just over $2,000,000 in the quarter and is expected to continue impacting results for the next two quarters. Crop Care revenue decreased by 1% to $35,700,000 driven by a sharp decline in revenue for Pertera due to price declines in agrochemicals. As a reminder, Pertera is the crop subsidiary that imports off patent agrochemicals from Asia with Labodos Brasil Retail as the customer. Another additional detractor in the quarter was AgrobioLogica, which faced headwinds from delays in pharma's purchases or decisions making, which pushed revenue out to future quarters. Offsetting the year over impact of this was the new M and A contribution from Chroma Chemica, a manufacturer of adjust vents acquired in Q4 as well as double digit growth for Unilagro, our specialty fertilizer manufacturing subsidiary. Speaker 300:11:25Consolidated gross profit for the quarter decreased by $34,000,000 to $59,500,000 dollars Gross margin contracted by 150 basis points to 12.3%. The main driver was the steep price decline in crop protection and fertilizer in our Brazil Agriculture Retail segment detailed by Rui. Latin, Agriculture Retail sites gross margin declined by 50 basis points to 13.8%, as we have mentioned, driven by the compression in crop protection distribution margin as well as the negative product category mix shift as higher margin seed distribution was hampered by previously mentioned product shortage. Crop Care gross margin retreated by 3.3% to 43.3%, driven by a lower margin at PerTEJA, as we mentioned too, due to agrochemical price declines and negative product mix shift at Unum Agro, while our IMOIgenfolio fertilizer product faced timing shift from delayed pharma decision making. These effects were partially offset by the financial contribution from the newly acquired Chromo Clinic, which boosts gross margins more than the crop year average as we expected. Speaker 300:12:47Adjusted EBITDA in Q1 was $11,100,000 down $32,900,000 from the prior year quarter, while adjusted EBITDA margin contracted 7.9% to 2.3%, chiefly driven by the impact of gross margin compression detail above. Now SG and A to sales ratio remained constant at 11.9% of sales. Yes, higher consulting and legal expense related to LaVodas public company expenses as well as increase in allowance for expected credit losses due to impact of El Nino on our expected foreign car payment schedules were offset by new initiatives driving low overhead expenses. All 3 operation segments saw negative year over year change in adjusted EBITDA as well as adjusted EBITDA margin. Non recurring expenses excluded from adjusted EBITDA increased by $5,400,000 to 8,500,000 dollars in Q1 2024. Speaker 300:13:52Due to, number 1, M and A accounting and tax diligence expenses, dollars 2,900,000 which includes a one time deal break fee related to NS Agro resulting from sustaining our plans to acquire them. 2nd, the provision of the second half of the de SPAC bonus to employees that will be paid in Q3 2024, dollars 1,300,000 And last, related party consultancy services expenses recognized as an overcurrent $2,300,000 and the increase of $1,300,000 amortization of the fair value of the inventories owned from acquired companies, which relates to purchase accounting. Having said that, I will pass the ball back to Lee. Speaker 200:14:43Thank you, Julian. And now I'll move to my concluding remarks. Guys, we're living in a very unusual situation in the global ag markets, but particularly in Brazil. Even though grain prices and ag input price adjustments are normal and expected, the intensity of some of those movements was not seen in the last decade. Given the high inventory levels carried by retailers. Speaker 200:15:11On top of that, we had the severe impact from El Nino that created additional challenges to farmers. In this context, Lavor is acting to mitigate short term impacts in our results. And at the same time, we're positioned the company to capitalize on the expected market recovery. Lavoro has gained market share in the Q1 and hired new experienced RTVs that can bring potential new sales of more than $100,000,000 for the next fiscal year. The market scenario is temporary and will improve as the secular trends and strong fundamentals of Latin agriculture have not changed. Speaker 200:15:51When this occurs, Lavoro will be even better positioned to deliver strong results and further consolidate our leadership position. And with that, I return to questions. Operator00:16:08Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. Our first question comes from the line of Bobby Burrowson with Canaccord. Please proceed with your question. Speaker 400:16:40Hi, thanks for taking my questions. So I guess maybe just starting with the share gain efforts that you highlighted. This is a tough market obviously in Brazil, but you guys are working to kind of accelerate those share gains. I'm curious your position in the market versus other players and how that might advantage you in some ways and maybe just expand on the efforts underway to drive share gain? Speaker 200:17:16Hi, Bhavy. Thanks for the question. Yes, absolutely. We're actually accelerating our share gains through some actions that includes, as I mentioned, the hiring of experienced sales consultants that in this more challenging scenario, they see the opportunity of joining a company that is more solid and with higher growth perspective. So we have been very successful in attracting new RTVs as well as we have been achieving a very low level of attrition between our current RTVs. Speaker 200:18:01So I think this is a first key component of that. In addition to this, we have been very successful in also preparing our logistics to deliver products to clients and to take orders in the last minute as farmers were not taking the same approach as previous years of placing orders in advance. So we've managed to present a very strong volume growth that Julian has mentioned by being better prepared to supply these last minute orders, and we plan to continue doing so. So I think there's a combination of factors, but in the end, it's related to our strong position to serve this market. Speaker 400:18:59Okay, great. And then just quickly on the comparison to 2014, I guess this is the worst environment you've seen since. And I'm wondering maybe just contrast the way things unfolded in terms of a recovery from 2014 versus the way things are positioned to recover in your opinion from this current situation? Speaker 200:19:35Yes. I think, Bobby, the difference between the current scenario in 2014 is that, first, the magnitude of the change in prices were not even that close. So we have, say, higher intensity of price changes in this time, particularly in the fertilizers and herbicides. And I think another point that is important is that the inventory on the retail channel is at a much higher levels this time because retailers were preparing for shortage of products, right? So what may be different this time is the pace of which the retail comes back to normal inventory levels and the situation of the overall market normalize. Speaker 200:20:33So it will be, I would say, slower recovery this time and definitely slower than what we have anticipated. We see early signs of improvement. So we see improvements in the level of inventories. We see farmers already planning for the next crops. But I think the timing will be longer this time. Speaker 100:21:03Okay. Super helpful. And Bobby, if I may just add a couple of points. I think just contrasting 2014 and this cycle, this cycle you had effectively a number of unrelated, whether geopolitical or pandemic related events occur and El Nino being the latest one that were not really related to the market, to the supply and demand for these products just hit all at the same time. 2014, the decline then was driven by kind of the hangover from the ethanol mandate in the U. Speaker 100:21:43S. With so it's more of a supply and demand question. Here, as far as inputs are concerned, it's sort of reverting to the mean after the post pandemic shock to the system. Now a couple of things that are different is that as far as Brazilian farmers are concerned, they're in excellent shape. In fact, they're even despite these headwinds, their margins are still double digits. Speaker 100:22:13And they will see a recovery next year once a lot of these trends dissipate and normalize. So that's a couple of things just for you to think about as you compare those two cycles. Speaker 400:22:28Okay. Thanks Tigran and thanks Wei. I'll jump back in the queue. Thank you. Operator00:22:41Our next question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. You have your line on mute. Our next question comes from the line of Vincent Anderson with Stifel. Operator00:23:12Please proceed with your question. Speaker 500:23:14Yes, thanks. Good evening, guys. So I just wanted to dig into the biologicals component of the guidance. I know you're starting up new capacity, so maybe there's some fixed cost absorption there that you're not getting in this revised guidance. But maybe beyond that, can you talk about the revised expectations between repeat customers that are not buying versus just pace of adoption being slower in this market environment? Speaker 200:23:48Hi, Vincent. I think I can start and then congrats can complement here. So first thing, the short term impact on the biological solution is related to the fact that farmers are more skeptical to invest now in the corn crop, okay? So we have lower expected margins for the 2nd crop and we have also a shorter time window for this crop as the soy crop got delayed. So we get higher risks for them to invest. Speaker 200:24:25So I think the level of adoption of biological solutions in the corn crop this time will be lower than in the previous year. So this is what is reflected in our guidance. I don't think this is again, it is not a structural change, but it's something that will affect the next corn crop. Regarding our new facility, we have the facility ready. We will not initiate production on the new facility August. Speaker 200:25:02So we will most likely postpone some of the additional costs related to initiating this operation. And we expect the market to normalize, and then we will eventually accelerate again. So I think it's a temporary thing. Speaker 300:25:22Months. Speaker 500:25:24That's helpful. Thanks. And then just maybe going back to guidance as a whole, just to help frame your decision making process. Like the drought obviously has been developing for a couple of months now. Internationally fertilizer prices have been falling for a while now. Speaker 500:25:42So I'm trying to just understand where the tipping point was in terms of your expectations on the year? And is it just as simple as you had to make volume commitments before you were certain corn would be delayed? Or is there something else that I'm missing? Speaker 600:26:02So I Speaker 200:26:02think compared to our last discussion, some of the things that have changed. First is the fact that we expect some of the margins on the inputs to be improving end prices, not prices from suppliers to retailers, but end prices to farmers to be recovering faster. So one thing that we observed is that given the competitive scenario in the market, we continue to see prices at very low and unusual levels at the from retailers to farmers. Speaker 400:26:48And I don't know Speaker 200:26:48if you think that has caused this concern is what Tigran has just mentioned on the climate events, particularly the El Nino implications. And we saw the situation getting worse as both the soy crop was affected in terms of replanting. So farmers were planting and then they have eventually to replant some of the soy. And also the shrinkage of time window time for the safrinha. So I think those were the main changes. Speaker 200:27:28And so basically the market we continue to believe that the market will recover and the challenges are temporary, but the pace is just different based on what I just described. Speaker 500:27:42Okay. That's helpful. Then maybe just one last one on kind of just Brazil in general because the U. S. Doesn't have 2 growing seasons. Speaker 500:27:53So I don't have a good comparison. But is the Brazilian farmer is there an opportunity right now for a Brazilian farmer who's looking at a very difficult safrinacorn environment to then sell them more product to maximize soybean yields or have most of the opportunities to do kind of in season adjustments to things like nutrient levels or biologicals? Has that window largely passed? Speaker 100:28:25Vincent, the way to think about it is the reason why the delayed planting and harvesting of soybean is impacting safrinha, which may not be super obvious at first, but it's effectively there's a window when you start planting the safrinha typically early to mid Feb, all the way to early March. And the reason why you want to plant then is because of the more drought like potential for drought like conditions in Brazil in general kick in April, May, and you don't want your seedlings to be in the growth phases when those things happen. And so what happens when you have a delayed planting for the safrinha is you increase the risk as the farmer has a higher risk of facing yield challenges. And therefore, what they're doing is either they're doing what they did last year. So they keep planting exactly like they did last year or they're downgrading technology in terms of medium technology for the seeds or they are shifting their crop type to other types, whether it's beans or sorghum or other types. Speaker 100:29:41And those obviously also have potential for demand for agochemicals. But from our standpoint, what's impacting us more so is the corn seed business for us, which is higher margin in agrochemicals and fertilizers. Speaker 500:29:59Right. Yes. What I was getting at is a farmer facing that likelihood, does it change their purchasing behaviors on the soy that's already in the ground? But it sounds like the impact of corn is just outweighs any opportunity for incremental sales into the current soybean crop that is causing the delay? Speaker 100:30:25Yes, that's probably a good assumption. Speaker 500:30:28Okay. All right. Well, thank you. Operator00:30:33Our next question comes from the line of Brian Wright with Roth. Please proceed with your question. Speaker 600:30:38Thanks. Good afternoon. I wanted to give a little bit of how to think about the issue between a medium tech seed environment for safrinha versus your kind of view for plant and Hector. So how to think about like the relevant impact or the magnitude of the impact on each of those on your outlook? Speaker 100:31:09I would say it's a couple of things. A part of it is the downgrading. A part of it is just less acres. We went from I think early November, ConAg was and some of the consultancies were forecasting acres to be anywhere between minus 2 to plus 5. I think now the consensus is more like anywhere between minus 10 and minus 3. Speaker 100:31:36So it's sort of shifted. And it's also impacting our Crop Care business in the sense that our biologicals, Agrobilogica does sell bio insecticides for the corn for certain insects. And we expect that to be a headwind as a result of what's going on in Safina. Now the reality is there's still a couple of weeks left. And so we took, I would say, an approach of not guessing and sort of taking what we thought was a scenario that's likely and rather than weight. Speaker 100:32:17There's chances that the acres actually end up being better than we expect, but we didn't want to take a chance. Speaker 600:32:26Okay. So it sounds like you're kind of thinking more of along like this outlook is kind of more predicated on a minus 10 on the acres than the minus 3 or is that the range you're kind of thinking as far as what you're predicating things on? Speaker 200:32:44Brian, yes. I think more important than the reduction in acreage here is the assumption behind the level of technical that farmers will want to apply in the corn crop. And this is actually more impactful to the overall retail results, right? So we basically believe that they may be trading down some seeds in the sense that using lower technology seeds and also lower application of biological solutions. It's not as much as the reduction in area that as Sigve mentioned, there's still not a consensus in this market. Speaker 200:33:32But I think there's an overall consensus that farmers will be more cautious this year with those types of technology investments. Speaker 600:33:41Okay. No, no. Thank you. If I could ask one more just on the press releases talked about ways to go on the destocking and just like and how to weigh and you also mentioned the fertilizer, but just maybe how to think about relative impact? Is it more fertilizer, more crop protection on the destocking? Speaker 600:34:05Or like, can you just help us figure out the relative importance of those? Speaker 200:34:16The crop protection is the most important category in the destocking process now. So I think fertilizers is they had an impact. But looking forward, the most important category to be looking at is the level of destocking of herbicides, fungicides and insecticides. So this is what we expect to see normalization over the next months. Speaker 600:34:49Okay. And in the I just want to make sure I read so I'm recalling the press release correctly that the thought process is by the end of March kind of timeframe is the kind of view on the substantially complete on the destocking or is that a fair characterization? Speaker 100:35:19Brian, I think it's hard to say. I mean, certainly, some of the data that we've been hearing from consultancies that run surveys suggest that as of December, we're probably 2 thirds along the way. But to be quite honest, the data is really hard to get and we'll really see it when we see prices at the farm gate of Zumangen start to recover. And then that will be really the real leading indicator. And we've yet to see a meaningful reversal or uptrend. Speaker 100:36:03It's sort of been bouncing along in kind of in a range bound way. SKU by SKU is different, but generally speaking, it's sort of stabilizing. It's been bouncing around for the last couple of months. Speaker 600:36:17Okay. Thank you so much. Operator00:36:23Our last question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. Speaker 700:36:40Okay. This is Ward. Can you hear me? Hello? Operator00:36:42Now we can hear you. Hello? Speaker 700:36:45Finally, we got this done, technology. First of all, thank you very much for squeezing me in at the end. Had a few technical issues. So two things I wanted to ask. First of all, as you look into it, I mean, obviously, the data we just got is ending September and we're late January. Speaker 700:37:01But as we think about the whole Ag Chem destocking that's been an issue in Brazil and all this high inventory you talked about. So it looks like you're kind of like your best guess was that softened outlook that we're going to get through this. Is that still going last 1, 2 or even more quarters than that? So anything that you have from up the ground information, that would be my very first question. I'm not sure if you've answered this already, but I got lost. Speaker 700:37:30So hopefully you can help me out on that. And thank you very much for that. Speaker 200:37:37Ben, I think we mentioned that it's right now it's hard to predict. What I can say is that we have some leading indicators that show that the level of inventory is improving. Okay. So when you compare the levels of inventory of retailers in January last year to December last year, We saw a decline back towards, I would say, more normal levels. The thing is that it's hard to predict if the normalization is going to occur between 3 months or 6 months. Speaker 200:38:17I think right now, it's we're going to have to see the development of Safrania as well as farmers' intentions on starting the new season, whether it is going to be delayed or if they're going to advance some of their purchases. So I would say we should see at least more 3 months of this process of destocking it by what the local consultants say with the possibility of extending a couple of months more. Speaker 700:38:54Okay, perfect. And then just for understanding reasons because it's been a while that we had La Nina and you've mentioned it as having had an impact. So if that were to last for a little longer and I mean in a similar situation as we had in La Nina for a couple of years prevailing, if we were to assume a similar scenario, can you kind of frame or help us understand what the market dynamics would be and how that would impact your business just from like a historic context, how it used to be in the past and how we should think about the impact go forward under assumption that El Nino is going to last? Speaker 100:39:33Yes. I mean, Ben, always difficult to predict quite headache events, but I would say relative to the historical data, this has been a particularly severe El Nino. Just to give you one indicator, the percentage of soybeans that had to be replanted in Brazil, so basically that to scrap and replanted altogether was between 5% 6%, which is 4 times to 5 times higher than normal. I mean, that's a fairly large area. Obviously, that's another very atypical thing to add to the series of atypical things happening this year. Speaker 100:40:14But I can't we can't obviously predict what's going to happen next year with the El Nino, but I would say relative to his circle, El Nino, this one has definitely been on the severe side. Speaker 700:40:27Perfect. Well, thank you very much and good luck with what's left for the year. Operator00:40:37That concludes our question and answer session. I'd like to hand the call back to management for closing remarks. Speaker 200:40:46So I think we covered most of the topics already. Maybe the last comment from my side is, I mean, it became very clear all the challenges, but we're also I think it's important to say that this crisis is also an opportunity for LaVora to further consolidate its leadership position. The company solid fundamentals will actually act in our favor. So this moment is a good moment for us to continue expanding market share. We'll continue to invest in the acquisition of new clients. Speaker 200:41:21And we expect to bring some news for the next quarters based on our continued investments in the market. Thank you all for participating and I will be all available for further questions. Thank you. Operator00:41:39Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnectRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallLavoro Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Lavoro Earnings HeadlinesLavoro price target lowered to $5 from $6 at OppenheimerApril 23 at 11:16 AM | markets.businessinsider.comThese Analysts Think Lavoro Limited's (NASDAQ:LVRO) Sales Are Under ThreatFebruary 11, 2025 | finance.yahoo.comTrump’s Secret Social Security Plan?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 26, 2025 | Paradigm Press (Ad)Lavoro Limited (NASDAQ:LVRO) Consensus Forecasts Have Become A Little Darker Since Its Latest ReportFebruary 6, 2025 | finance.yahoo.comLavoro price target lowered to $5.50 from $6.25 at CanaccordFebruary 5, 2025 | markets.businessinsider.comLavoro revises FY2025 revenue outlook to $1.12B-$1.28B amid supply chain disruptionsFebruary 4, 2025 | msn.comSee More Lavoro Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Lavoro? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Lavoro and other key companies, straight to your email. Email Address About LavoroLavoro (NASDAQ:LVRO) operates as an agricultural inputs retailer. The company operates through three segments: Brazil Cluster, LATAM Cluster, and Crop Care Cluster. It distributes agricultural inputs, such as crop protection, seeds, fertilizers, foliar fertilizers, biologicals, adjuvants, organominerals, and others for the agricultural industry. The company also produces specialty fertilizers, crop protection products, and biological crop inputs. It operates in Brazil, Colombia, and Uruguay. The company sells its products through its physical stores and digital channel. 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There are 8 speakers on the call. Operator00:00:00Greetings, and welcome to the Lovaro's Fiscal First Quarter 20 24 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tigran Karapishan, Investor Relations for Lovaro. Operator00:00:27Thank you. You may begin. Speaker 100:00:31Thank you for joining us today on Lovaro's fiscal 2024 Q1 earnings conference call for results ended September 2023. On today's call are Chief Executive Officer, Jui Quina and Chief Financial Officer, Julian Garrido. The company has provided a supplemental earnings presentation on its Investor Relations website atir.lavorogro.com and 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 and 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 risk and uncertainties that could materially differ from actual events or those described in these forward looking statements. Speaker 100:01:33Please refer to the company's registration statement on Form F-one filed with the SEC on March 23, 2023, or our report on Form 20 F for 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 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, 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 contained in isolation or as a substitute for the financial information presented in accordance to 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 Ruiz Konya, CEO. Speaker 200:02:36Thank you, Chigran. 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 fiscal quarter, for our Q1 2024 ended in September, Lavoro delivered revenues of US483 million dollars up 11% year over year and up 3% in current local terms. Adjusted EBITDA was $11,000,000 declining 75% over the previous year quarter. Speaker 200:03:24Our revenue grew in the quarter in spite of the intense industry wide deflationary pressures fell across major product categories, as 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 Lavoro's adjusted EBITDA margins compressed to 2.3%. Now let me take a moment to update you on the market environment. Since our last update, we saw an emergence of El Nino phenomenon in Brazil. Speaker 200:04:28Severe drought conditions in many producing states, including Mato Grosso have caused delays implanting on this soybean crop and created challenges for the next crop as well. We now expect this to adversely impact the 2nd corn crop with reduced planted acres as well as seeing a portion of farmers up 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 2nd 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 effect that ag input prices variations have on our distribution margins. Speaker 200:05:33As 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 an uptrend or downward trend, our distribution margins are temporarily impacted given the 3 to 4 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. Speaker 200:06:32What 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 ag retail 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 Nino as well as these lower recovery in distribution margins. We're now forecasting adjusted EBITDA to be in the range of $80,000,000 to $110,000,000 while our guidance for revenues remains unchanged. Speaker 200:07:33With that, let me turn to Julian for some details on our financials. Speaker 300:07:40Thanks, Wu. I'll begin by covering our consolidated financial results for the fiscal Q1 2024, which ended on September 30, 2023. And providing additional details regarding our revised full year fiscal 2024 guidance. Let me start with the Q1. Consolidated revenue rose by 11% to $482,000,000 as Louis has mentioned. Speaker 300:08:11In constant currency terms, the revenue increase was 3%. Green Goods revenue increased 5% with volume growth more than offsetting pricing declines. Revenue increased 109%, driven by greater desire by our customers for entering the barter transactions. Looking at revenue by segment, Brazil Retail saw revenue increasing by 15%, reflecting the improved sales volumes of crop protection, fertilizers and specialty product categories, which increased 54%, 53% and 33%, respectively. This more than offset the decline in average sales price that we elaborated on before. Speaker 300:09:06Avocado gained share in the quarter, driven by good execution from our local commercial teams. The contribution from recently acquired the Ceferanes in the south of Brazil contributed roughly 2% to the overall revenue growth for the segment. Now talking about Latin retail revenue, it increased by 1%, 9% in Colombian peso terms relative to the prior year quarter, landing at 66.3 dollars The decline was primarily driven by the pricing headwinds to fertilizers as well as supply shortages of corn feeds from a key supplier, which resulted in lost revenue opportunity in 'nineteen to just over $2,000,000 for the quarter. Actions have already been put in place to add new suppliers to mitigate impact for the rest of the year. In addition, our LatAm business continued to suffer from the impact of the rupture of supply of Paraquat, top leading herbicide in Colombia, from a key supplier. Speaker 300:10:15The year over year headwind from Paraquat amounted to just over $2,000,000 in the quarter and is expected to continue impacting results for the next two quarters. Crop Care revenue decreased by 1% to $35,700,000 driven by a sharp decline in revenue for Pertera due to price declines in agrochemicals. As a reminder, Pertera is the crop subsidiary that imports off patent agrochemicals from Asia with Labodos Brasil Retail as the customer. Another additional detractor in the quarter was AgrobioLogica, which faced headwinds from delays in pharma's purchases or decisions making, which pushed revenue out to future quarters. Offsetting the year over impact of this was the new M and A contribution from Chroma Chemica, a manufacturer of adjust vents acquired in Q4 as well as double digit growth for Unilagro, our specialty fertilizer manufacturing subsidiary. Speaker 300:11:25Consolidated gross profit for the quarter decreased by $34,000,000 to $59,500,000 dollars Gross margin contracted by 150 basis points to 12.3%. The main driver was the steep price decline in crop protection and fertilizer in our Brazil Agriculture Retail segment detailed by Rui. Latin, Agriculture Retail sites gross margin declined by 50 basis points to 13.8%, as we have mentioned, driven by the compression in crop protection distribution margin as well as the negative product category mix shift as higher margin seed distribution was hampered by previously mentioned product shortage. Crop Care gross margin retreated by 3.3% to 43.3%, driven by a lower margin at PerTEJA, as we mentioned too, due to agrochemical price declines and negative product mix shift at Unum Agro, while our IMOIgenfolio fertilizer product faced timing shift from delayed pharma decision making. These effects were partially offset by the financial contribution from the newly acquired Chromo Clinic, which boosts gross margins more than the crop year average as we expected. Speaker 300:12:47Adjusted EBITDA in Q1 was $11,100,000 down $32,900,000 from the prior year quarter, while adjusted EBITDA margin contracted 7.9% to 2.3%, chiefly driven by the impact of gross margin compression detail above. Now SG and A to sales ratio remained constant at 11.9% of sales. Yes, higher consulting and legal expense related to LaVodas public company expenses as well as increase in allowance for expected credit losses due to impact of El Nino on our expected foreign car payment schedules were offset by new initiatives driving low overhead expenses. All 3 operation segments saw negative year over year change in adjusted EBITDA as well as adjusted EBITDA margin. Non recurring expenses excluded from adjusted EBITDA increased by $5,400,000 to 8,500,000 dollars in Q1 2024. Speaker 300:13:52Due to, number 1, M and A accounting and tax diligence expenses, dollars 2,900,000 which includes a one time deal break fee related to NS Agro resulting from sustaining our plans to acquire them. 2nd, the provision of the second half of the de SPAC bonus to employees that will be paid in Q3 2024, dollars 1,300,000 And last, related party consultancy services expenses recognized as an overcurrent $2,300,000 and the increase of $1,300,000 amortization of the fair value of the inventories owned from acquired companies, which relates to purchase accounting. Having said that, I will pass the ball back to Lee. Speaker 200:14:43Thank you, Julian. And now I'll move to my concluding remarks. Guys, we're living in a very unusual situation in the global ag markets, but particularly in Brazil. Even though grain prices and ag input price adjustments are normal and expected, the intensity of some of those movements was not seen in the last decade. Given the high inventory levels carried by retailers. Speaker 200:15:11On top of that, we had the severe impact from El Nino that created additional challenges to farmers. In this context, Lavor is acting to mitigate short term impacts in our results. And at the same time, we're positioned the company to capitalize on the expected market recovery. Lavoro has gained market share in the Q1 and hired new experienced RTVs that can bring potential new sales of more than $100,000,000 for the next fiscal year. The market scenario is temporary and will improve as the secular trends and strong fundamentals of Latin agriculture have not changed. Speaker 200:15:51When this occurs, Lavoro will be even better positioned to deliver strong results and further consolidate our leadership position. And with that, I return to questions. Operator00:16:08Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. Our first question comes from the line of Bobby Burrowson with Canaccord. Please proceed with your question. Speaker 400:16:40Hi, thanks for taking my questions. So I guess maybe just starting with the share gain efforts that you highlighted. This is a tough market obviously in Brazil, but you guys are working to kind of accelerate those share gains. I'm curious your position in the market versus other players and how that might advantage you in some ways and maybe just expand on the efforts underway to drive share gain? Speaker 200:17:16Hi, Bhavy. Thanks for the question. Yes, absolutely. We're actually accelerating our share gains through some actions that includes, as I mentioned, the hiring of experienced sales consultants that in this more challenging scenario, they see the opportunity of joining a company that is more solid and with higher growth perspective. So we have been very successful in attracting new RTVs as well as we have been achieving a very low level of attrition between our current RTVs. Speaker 200:18:01So I think this is a first key component of that. In addition to this, we have been very successful in also preparing our logistics to deliver products to clients and to take orders in the last minute as farmers were not taking the same approach as previous years of placing orders in advance. So we've managed to present a very strong volume growth that Julian has mentioned by being better prepared to supply these last minute orders, and we plan to continue doing so. So I think there's a combination of factors, but in the end, it's related to our strong position to serve this market. Speaker 400:18:59Okay, great. And then just quickly on the comparison to 2014, I guess this is the worst environment you've seen since. And I'm wondering maybe just contrast the way things unfolded in terms of a recovery from 2014 versus the way things are positioned to recover in your opinion from this current situation? Speaker 200:19:35Yes. I think, Bobby, the difference between the current scenario in 2014 is that, first, the magnitude of the change in prices were not even that close. So we have, say, higher intensity of price changes in this time, particularly in the fertilizers and herbicides. And I think another point that is important is that the inventory on the retail channel is at a much higher levels this time because retailers were preparing for shortage of products, right? So what may be different this time is the pace of which the retail comes back to normal inventory levels and the situation of the overall market normalize. Speaker 200:20:33So it will be, I would say, slower recovery this time and definitely slower than what we have anticipated. We see early signs of improvement. So we see improvements in the level of inventories. We see farmers already planning for the next crops. But I think the timing will be longer this time. Speaker 100:21:03Okay. Super helpful. And Bobby, if I may just add a couple of points. I think just contrasting 2014 and this cycle, this cycle you had effectively a number of unrelated, whether geopolitical or pandemic related events occur and El Nino being the latest one that were not really related to the market, to the supply and demand for these products just hit all at the same time. 2014, the decline then was driven by kind of the hangover from the ethanol mandate in the U. Speaker 100:21:43S. With so it's more of a supply and demand question. Here, as far as inputs are concerned, it's sort of reverting to the mean after the post pandemic shock to the system. Now a couple of things that are different is that as far as Brazilian farmers are concerned, they're in excellent shape. In fact, they're even despite these headwinds, their margins are still double digits. Speaker 100:22:13And they will see a recovery next year once a lot of these trends dissipate and normalize. So that's a couple of things just for you to think about as you compare those two cycles. Speaker 400:22:28Okay. Thanks Tigran and thanks Wei. I'll jump back in the queue. Thank you. Operator00:22:41Our next question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. You have your line on mute. Our next question comes from the line of Vincent Anderson with Stifel. Operator00:23:12Please proceed with your question. Speaker 500:23:14Yes, thanks. Good evening, guys. So I just wanted to dig into the biologicals component of the guidance. I know you're starting up new capacity, so maybe there's some fixed cost absorption there that you're not getting in this revised guidance. But maybe beyond that, can you talk about the revised expectations between repeat customers that are not buying versus just pace of adoption being slower in this market environment? Speaker 200:23:48Hi, Vincent. I think I can start and then congrats can complement here. So first thing, the short term impact on the biological solution is related to the fact that farmers are more skeptical to invest now in the corn crop, okay? So we have lower expected margins for the 2nd crop and we have also a shorter time window for this crop as the soy crop got delayed. So we get higher risks for them to invest. Speaker 200:24:25So I think the level of adoption of biological solutions in the corn crop this time will be lower than in the previous year. So this is what is reflected in our guidance. I don't think this is again, it is not a structural change, but it's something that will affect the next corn crop. Regarding our new facility, we have the facility ready. We will not initiate production on the new facility August. Speaker 200:25:02So we will most likely postpone some of the additional costs related to initiating this operation. And we expect the market to normalize, and then we will eventually accelerate again. So I think it's a temporary thing. Speaker 300:25:22Months. Speaker 500:25:24That's helpful. Thanks. And then just maybe going back to guidance as a whole, just to help frame your decision making process. Like the drought obviously has been developing for a couple of months now. Internationally fertilizer prices have been falling for a while now. Speaker 500:25:42So I'm trying to just understand where the tipping point was in terms of your expectations on the year? And is it just as simple as you had to make volume commitments before you were certain corn would be delayed? Or is there something else that I'm missing? Speaker 600:26:02So I Speaker 200:26:02think compared to our last discussion, some of the things that have changed. First is the fact that we expect some of the margins on the inputs to be improving end prices, not prices from suppliers to retailers, but end prices to farmers to be recovering faster. So one thing that we observed is that given the competitive scenario in the market, we continue to see prices at very low and unusual levels at the from retailers to farmers. Speaker 400:26:48And I don't know Speaker 200:26:48if you think that has caused this concern is what Tigran has just mentioned on the climate events, particularly the El Nino implications. And we saw the situation getting worse as both the soy crop was affected in terms of replanting. So farmers were planting and then they have eventually to replant some of the soy. And also the shrinkage of time window time for the safrinha. So I think those were the main changes. Speaker 200:27:28And so basically the market we continue to believe that the market will recover and the challenges are temporary, but the pace is just different based on what I just described. Speaker 500:27:42Okay. That's helpful. Then maybe just one last one on kind of just Brazil in general because the U. S. Doesn't have 2 growing seasons. Speaker 500:27:53So I don't have a good comparison. But is the Brazilian farmer is there an opportunity right now for a Brazilian farmer who's looking at a very difficult safrinacorn environment to then sell them more product to maximize soybean yields or have most of the opportunities to do kind of in season adjustments to things like nutrient levels or biologicals? Has that window largely passed? Speaker 100:28:25Vincent, the way to think about it is the reason why the delayed planting and harvesting of soybean is impacting safrinha, which may not be super obvious at first, but it's effectively there's a window when you start planting the safrinha typically early to mid Feb, all the way to early March. And the reason why you want to plant then is because of the more drought like potential for drought like conditions in Brazil in general kick in April, May, and you don't want your seedlings to be in the growth phases when those things happen. And so what happens when you have a delayed planting for the safrinha is you increase the risk as the farmer has a higher risk of facing yield challenges. And therefore, what they're doing is either they're doing what they did last year. So they keep planting exactly like they did last year or they're downgrading technology in terms of medium technology for the seeds or they are shifting their crop type to other types, whether it's beans or sorghum or other types. Speaker 100:29:41And those obviously also have potential for demand for agochemicals. But from our standpoint, what's impacting us more so is the corn seed business for us, which is higher margin in agrochemicals and fertilizers. Speaker 500:29:59Right. Yes. What I was getting at is a farmer facing that likelihood, does it change their purchasing behaviors on the soy that's already in the ground? But it sounds like the impact of corn is just outweighs any opportunity for incremental sales into the current soybean crop that is causing the delay? Speaker 100:30:25Yes, that's probably a good assumption. Speaker 500:30:28Okay. All right. Well, thank you. Operator00:30:33Our next question comes from the line of Brian Wright with Roth. Please proceed with your question. Speaker 600:30:38Thanks. Good afternoon. I wanted to give a little bit of how to think about the issue between a medium tech seed environment for safrinha versus your kind of view for plant and Hector. So how to think about like the relevant impact or the magnitude of the impact on each of those on your outlook? Speaker 100:31:09I would say it's a couple of things. A part of it is the downgrading. A part of it is just less acres. We went from I think early November, ConAg was and some of the consultancies were forecasting acres to be anywhere between minus 2 to plus 5. I think now the consensus is more like anywhere between minus 10 and minus 3. Speaker 100:31:36So it's sort of shifted. And it's also impacting our Crop Care business in the sense that our biologicals, Agrobilogica does sell bio insecticides for the corn for certain insects. And we expect that to be a headwind as a result of what's going on in Safina. Now the reality is there's still a couple of weeks left. And so we took, I would say, an approach of not guessing and sort of taking what we thought was a scenario that's likely and rather than weight. Speaker 100:32:17There's chances that the acres actually end up being better than we expect, but we didn't want to take a chance. Speaker 600:32:26Okay. So it sounds like you're kind of thinking more of along like this outlook is kind of more predicated on a minus 10 on the acres than the minus 3 or is that the range you're kind of thinking as far as what you're predicating things on? Speaker 200:32:44Brian, yes. I think more important than the reduction in acreage here is the assumption behind the level of technical that farmers will want to apply in the corn crop. And this is actually more impactful to the overall retail results, right? So we basically believe that they may be trading down some seeds in the sense that using lower technology seeds and also lower application of biological solutions. It's not as much as the reduction in area that as Sigve mentioned, there's still not a consensus in this market. Speaker 200:33:32But I think there's an overall consensus that farmers will be more cautious this year with those types of technology investments. Speaker 600:33:41Okay. No, no. Thank you. If I could ask one more just on the press releases talked about ways to go on the destocking and just like and how to weigh and you also mentioned the fertilizer, but just maybe how to think about relative impact? Is it more fertilizer, more crop protection on the destocking? Speaker 600:34:05Or like, can you just help us figure out the relative importance of those? Speaker 200:34:16The crop protection is the most important category in the destocking process now. So I think fertilizers is they had an impact. But looking forward, the most important category to be looking at is the level of destocking of herbicides, fungicides and insecticides. So this is what we expect to see normalization over the next months. Speaker 600:34:49Okay. And in the I just want to make sure I read so I'm recalling the press release correctly that the thought process is by the end of March kind of timeframe is the kind of view on the substantially complete on the destocking or is that a fair characterization? Speaker 100:35:19Brian, I think it's hard to say. I mean, certainly, some of the data that we've been hearing from consultancies that run surveys suggest that as of December, we're probably 2 thirds along the way. But to be quite honest, the data is really hard to get and we'll really see it when we see prices at the farm gate of Zumangen start to recover. And then that will be really the real leading indicator. And we've yet to see a meaningful reversal or uptrend. Speaker 100:36:03It's sort of been bouncing along in kind of in a range bound way. SKU by SKU is different, but generally speaking, it's sort of stabilizing. It's been bouncing around for the last couple of months. Speaker 600:36:17Okay. Thank you so much. Operator00:36:23Our last question comes from the line of Ben Theurer with Barclays. Please proceed with your question. Ben, your line is live. Speaker 700:36:40Okay. This is Ward. Can you hear me? Hello? Operator00:36:42Now we can hear you. Hello? Speaker 700:36:45Finally, we got this done, technology. First of all, thank you very much for squeezing me in at the end. Had a few technical issues. So two things I wanted to ask. First of all, as you look into it, I mean, obviously, the data we just got is ending September and we're late January. Speaker 700:37:01But as we think about the whole Ag Chem destocking that's been an issue in Brazil and all this high inventory you talked about. So it looks like you're kind of like your best guess was that softened outlook that we're going to get through this. Is that still going last 1, 2 or even more quarters than that? So anything that you have from up the ground information, that would be my very first question. I'm not sure if you've answered this already, but I got lost. Speaker 700:37:30So hopefully you can help me out on that. And thank you very much for that. Speaker 200:37:37Ben, I think we mentioned that it's right now it's hard to predict. What I can say is that we have some leading indicators that show that the level of inventory is improving. Okay. So when you compare the levels of inventory of retailers in January last year to December last year, We saw a decline back towards, I would say, more normal levels. The thing is that it's hard to predict if the normalization is going to occur between 3 months or 6 months. Speaker 200:38:17I think right now, it's we're going to have to see the development of Safrania as well as farmers' intentions on starting the new season, whether it is going to be delayed or if they're going to advance some of their purchases. So I would say we should see at least more 3 months of this process of destocking it by what the local consultants say with the possibility of extending a couple of months more. Speaker 700:38:54Okay, perfect. And then just for understanding reasons because it's been a while that we had La Nina and you've mentioned it as having had an impact. So if that were to last for a little longer and I mean in a similar situation as we had in La Nina for a couple of years prevailing, if we were to assume a similar scenario, can you kind of frame or help us understand what the market dynamics would be and how that would impact your business just from like a historic context, how it used to be in the past and how we should think about the impact go forward under assumption that El Nino is going to last? Speaker 100:39:33Yes. I mean, Ben, always difficult to predict quite headache events, but I would say relative to the historical data, this has been a particularly severe El Nino. Just to give you one indicator, the percentage of soybeans that had to be replanted in Brazil, so basically that to scrap and replanted altogether was between 5% 6%, which is 4 times to 5 times higher than normal. I mean, that's a fairly large area. Obviously, that's another very atypical thing to add to the series of atypical things happening this year. Speaker 100:40:14But I can't we can't obviously predict what's going to happen next year with the El Nino, but I would say relative to his circle, El Nino, this one has definitely been on the severe side. Speaker 700:40:27Perfect. Well, thank you very much and good luck with what's left for the year. Operator00:40:37That concludes our question and answer session. I'd like to hand the call back to management for closing remarks. Speaker 200:40:46So I think we covered most of the topics already. Maybe the last comment from my side is, I mean, it became very clear all the challenges, but we're also I think it's important to say that this crisis is also an opportunity for LaVora to further consolidate its leadership position. The company solid fundamentals will actually act in our favor. So this moment is a good moment for us to continue expanding market share. We'll continue to invest in the acquisition of new clients. Speaker 200:41:21And we expect to bring some news for the next quarters based on our continued investments in the market. Thank you all for participating and I will be all available for further questions. Thank you. Operator00:41:39Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnectRead morePowered by