Verde Agritech Ltd T.NPK

RE:RE:Transcript report

[KirklandX]

I agree with you a PedroPistacio, this is a really important point. 

I slightly disagree with you around how much the company are revealing around price - I actually think they are showing a lot of detail, but its just they could be explaining it better. 

When listening to the results call a few days ago, I think the key phrase that CV used on pricing, was "delivered KCl price". To extrapolate this, I believe he means "delivered KCl price to the farmer". This is their reference price, and it is this which is divided by 6 to price Verde's basic K Forte product (due to Verde's product having 1/6 the potassium content). 

So what is this "delivered KCl" price? Very simply you first take the KCl price of when it arrives in port in Brazil (we call this KCl Brazil CFR) , and to this we add the cost to deliver this product to the farmer. We can get this cost from the news release on April 21, which looked into the data inputs for the updated PSF - this cost comes out as US$170.51 per tonne of KCl. So once 1 tonne of KCl arrives into Brazil (the CFR price) you add the cost to get to the farmer, which is an extra US$171.50 per tonne.

So to do an example. If the current KCl Brazil CFR price is US$1,100. What is the rough price of K Forte? 

K Forte = KCl delivered price to farmer / 6
Same as :
K Forte = (KCl Brazil CFR + delivery cost to farmers) / 6
K Forte = US$1,100 + US$170 / 6 
K Forte = US$211 (or C$266) per tonne

It should be noted this is a CIF price. i.e. within this price Verde pays to deliver the product to the farmer. In the last four quarters this delivery cost has averaged at around C$40 per tonne. So an FOB price (net to Verde, no delivery cost) is roughly C$226 per tonne. 

I do think the company will be offering small discounts depending on what time of year it is, if the farmer is a repeat buyer, etc. But these are the price levels that we are now locking in. It's incredible. 

GLTA

p.s. A few terms to get your head around, which helps reading some of the results:
- KCl Brazil CFR price = the price of KCl when is delivered to port in Brazil.
- Verde CIF price = the price that Verde charges for a tonne of product, that is then delivered to the farmer by Verde (i.e. Verde pays for delivery) 
- Verde FOB price = the price that Verde charges of a tonne of product, that the farmer picks up from Verde's plant (i.e. Verde doesn't pay for delivery).