Post by
15Stanmore on Apr 01, 2021 9:28am
2020 Financial Statements in local currency
Given Verde is essentially a domestic Brazilian operation with over 99% of its sales in local markets and essentially all its operating costs incurred in Brazil, I like to take the Canadian dollar figures in the audited financial statements and recast them into Brazilian Reals (R$). I will share some of these figures in this and in following posts.
Let's start with the top line numbers:
(in R$ 000s) 2020 2019 % change
Revenue 34,922 17,885 95.3%
Production Costs 13,390 9,392 42.6%
Gross Profit 21,531 8,493 153.5%
These top line numbers are excellent - increasing sales (+95.3%) supported by more slowly rising costs (+42.6%) producing a dramatic increase in Gross Profit (+153.5%)
Lets look at these on a per tonne equivalent:
(in R$) 2020 2019 % change
Tonnes sold 243,707 119,809 103.4%
Revenue 143.29 149.28 -4.0%
Production Costs 54.94 78.39 -29.9%
Gross Profit 88.35 70.89 24.6%
As we know, the domestic price of Verde's products are at present very much dependent on the equivalent delivered cost of the traditional KCl potash alternative, which is directly correlated with the world price for potash expressed in US dollars. For example, all the product pricing in the 2017 feasability study are based off a long term world potash price assumption of US$250 per tonne and a US - Brazil exchange rate of US$1 = R$3.28. As the Verde product has a much lower potassium content, it is priced at 1/6 of the KCl price.
The average exchange rates used in the figures above are $1 Canadian = R$3.81 in 2020 and $1 Canadian = R$2.97. This gives a KCl equivalent price in 2020 of $225 Canadian and in 2019 of $301. These appear in line with the fall in KCl prices between 2019 and 2020.
In Q1 2021, the world price of KCl is sitting at around US$200 (about $266 Canadian), which translates into $1,066 Brazilian Reals. This would produce an equivalent price per tonne for Verde's K-Forte of R$177.8, so perhaps the 4% decline in average price in 2020 can be reversed in 2021. At R$177.8, this would produce a 23% increase in reported revenues.
On the cost side, the 30% drop in average cost per tonne to just under R$55 is excellent progress as the existing plant builds up to its optimal throughput capacity. The fully loaded cost per tonne is a critical Key Performance Indicator (KPI) which can be readily measured and analyzed on an hourly, daily, weekly, monthly, quarterly and annual basis. This means that the performance and efficiency of local production managers can be accurately measured, incentivised and rewarded as the Company's production capacity is increased over the coming years.
At the 2020 cost of R$55 and using current exchange rates, this translates into a Canadian $ cost of $13.75 and a US$ cost of $10.31. This compares favourably to the 2017 Pre-Feasibility study Phase 1 cost of US$14.53 tonne (a 29% reduction). If the Company can hold or keep reducing the per tonne costs, while the selling price improves with the movement in the world price for KCl, the gross profit numbers per tonne will continue to improve from their already favourable levels.
All in alll very good news on the Gross Profit front, and a big shout out to the 42 production staff engaged in the extraction and processing functions who have turned in an excellent performance in 2020.
Comment by
sparkdog on Apr 01, 2021 10:23am
15Stanmore Cristiano should hire you. You do a better job than the IR department.