Gross margin now up to 81% which resulted in a modest net earnings of $240,000.
All they need is to boost volumes and perhaps that is the incentive behind the CO2 carbon credit initiative ..
Verde Agritech earns $241,000 in Q2 2023
2023-08-14 10:02 ET - News Release
Mr. Cristiano Veloso reports
VERDE ACHIEVES C$10.3 MILLION REVENUE, 81% GROSS MARGIN AND C$2.1 MILLION EBITDA IN THE SECOND QUARTER OF 2023
Verde Agritech Ltd. has released its financial results for the second quarter ended June 30, 2023 (Q2 2023).
"We are reassured by Verde's renewed net profit despite the most challenging fertilizer market conditions in recent years. Brazilian farmers have grappled with the convergence of the highest interest rates since 2006 and their dependence on credit. This peaked in Q2 2023, period when farmers must acquire inputs for the upcoming planting season, a challenge compounded by the dip in agricultural commodity prices exactly when their crops should be marketed. In this extraordinary context, foreign fertilizer companies with lower capital cost can offer better terms to Brazilian farmers, who have a difficult choice between the products they want to buy and the ones they can afford to finance," commented Cristiano Veloso, Founder, President & CEO of Verde.
Q2 2023 Financials
- Sales of Verde's multinutrient potassium products, BAKS(TM) and K Forte(TM) sold internationally as Super Greensand(TM) (the "Product") by volume in Q2 2023 were 107,000 tonnes, compared to 202,000 tonnes in Q2 2022.
- Revenue in Q2 2023 was $10.3 million, compared to $24.9 million in Q2 2022.
- Cash and trade receivables held by the Company in Q2 2023 were $23.8 million, compared to $22.1 million in Q2 2022.
- EBITDA before non-cash events in Q2 2023 was $2.1 million, compared to $10.8 million in Q2 2022.
- Total non-current assets in Q2 2023 were $69.6 million, compared to $40.9 million in Q2 2022.
- Net profit in Q2 2023 was $0.2 million, compared to a $9.6 million profit in Q2 2022.
- In Q2 2023, 8,480 million tonnes of chloride have been prevented from being applied into soils by farmers who used the Product in lieu of potassium chloride ("KCl") fertilizers. A total of 129,682 tonnes of chloride has been prevented from being applied into soils by Verde's customers since the Company started production.
"Amidst this landscape of market downturns, we acknowledge the potential for even greater performance in this quarter had Verde been able to compete on level ground with companies boasting larger financial resources and consequentially better credit terms for farmers. Achieving a profitable quarter in the face of adversities underscores our Company's resilience and ability to navigate intricate markets, demonstrating our capacity to not only survive but also thrive under conditions where smaller players would often falter," stated Mr. Veloso.
"Currently, the agricultural market is showing early signs of recovery. Agricultural commodity prices are no longer experiencing a rapid decline and interest rates in Brazil have started to decrease from their elevated levels. We anticipate that these shifts will soon mitigate the extraordinary distortions that temporarily favoured competitors with lower capital costs, thereby easing the challenges of this competitive market environment," concluded.
Subsequent Events
- In July 2023, the Company announced the carbon capture properties of its Products as detailed by an independent study conducted at Newcastle University under the leadership of Prof. David Manning, PhD, a renowned soil scientist. The carbon dioxide ("CO 2 ") capture is inherent to the Products and is estimated at 120kg per tonne. The CO2 removal does not require any change to the Products' production and farmland application methods, nor does it change the nutritional benefits to plants. As a result, in the production scenario of 50Mtpy,3 Verde would be one of the world's largest carbon capture projects with a total of 6 million tonnes of CO2 permanently subtracted from the atmosphere every year.
- In July 2023, Verde announced that it is in advanced negotiations to sell carbon credits to major international corporations that are established purchasers of permanent carbon offset. Currently, carbon credits for permanent carbon offset similar to Verde's are being sold at prices up to US$500 per tonne.
Market Overview
Commodity Prices
The agricultural commodities market has been experiencing significant fluctuations on a downward trend for the last months, impacting the fertilizers' market worldwide. The table below shows the shifts in the price of some of the main commodities in Brazil.
Notably:
- Soybean: Average price experienced a 19 per cent decline in H1 2023 compared to H1 2022, and a further decrease of 27 per cent in Q2 2023 compared to Q2 2022;
- Corn: Average price experienced a 20 per cent decline in H1 2023 compared to H1 2022, and a further decrease of 28 per cent in Q2 2023 compared to Q2 2022;
- Coffee: Average price experienced a 22 per cent decline in H1 2023 compared to H1 2022, and a decrease of 20 per cent in Q2 2023 compared to Q2 2022;
- Cotton: Average price experienced a 36 per cent decline in H1 2023 compared to H1 2022, and a further decrease of 46 per cent in Q2 2023 compared to Q2 2022.
Brazilian Economy
On August 5, 2023, the Central Bank of Brazil (the "Bank") lowered its monetary policy interest rate ("SELIC") by 0.5 per cent, from 13.75 per cent to 13.25 per cent.6 On August 7, 2023, the Boletim Focus, a weekly report released by the Bank and representing the collective outlook of financial institutions regarding crucial economic indicators, projected that the SELIC rate will reach 11.75 per cent per annum by the end of 2023.
The most recent instance of the Bank reducing the SELIC occurred in August 2020, when the rate decreased from 2.25 per cent to 2 per cent per annum as a response to the economic downturn induced by the COVID-19 pandemic. Following this, the Monetary Policy Committee ("Copom") of the Bank initiated a sequence of 12 consecutive rate hikes, commencing in March 2021. This series unfolded against the backdrop of escalating prices in essential commodities like food, energy, and fuel. Since August of the preceding year, the rate has remained fixed at 13.75 per cent per annum for seven consecutive periods7.
Looking ahead to the conclusion of 2024, the projection envisages a decline in