Company’s Net Debt Increased by 34%
Agricultural input distributor Lavoro closed its fiscal year 2024, which ended on June 30, with a net loss of $154.6 million—compared to a loss of $43.6 million the previous year. The 2024 results reflected declining input prices, which impacted margins, as well as increased financial and tax costs.
“What happened regarding margins is understandable, given the steep drop in input prices, which led to a deterioration of margins and endpoint prices,” said Ruy Cunha, CEO of the company, adding that high costs of products in inventory also contributed.
Revenue grew by 5% to $1.9 billion, driven by gains in market share and increased sales volume, despite falling input prices. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell by 64.5% to $53.3 million.
Net debt stood at $207.5 million, or R$ 1.1 billion, a 34% increase over the year. As a result, leverage (the ratio of EBITDA to net debt) in Brazilian reais surged from 1.1 times at the end of 2023 to 4.2 times at the close of 2024.
Challenge
According to the CEO, the biggest market challenge is the low liquidity among producers, who have less access to credit at higher costs, although he believes this situation is temporary. “Part of the low liquidity is due to increased caution from financial agents, which is normal after a tough year for margins and productivity.”
The CEO noted a significant extension of accounts receivable, “in a much larger proportion than we saw last year.” He did not disclose the company’s delinquency rate but mentioned that the delay in collections is around two to three months.
Relationship with Creditors
The market is cautiously observing the input sector following competitor Agrogalaxy’s request for judicial recovery, raising concerns that Lavoro may also need creditor protection in the near future.
However, Cunha stated that the quarterly results should reassure the market. “We are quite confident in the company’s solidity, and discussions of judicial recovery are not on our agenda.” He emphasized that the company has been in talks with investors for a long time and that the pursuit of capital is not a last-minute effort.
Outlook
The CEO anticipates some stability in prices and a potential recovery in margins. He also mentioned that inventory levels improved, decreasing from R$ 1.8 billion in Q4 2023 to R$ 1.7 billion in 2024.
For 2025, Lavoro expects to see EBITDA growth primarily driven by margin recovery. He does not expect it to be a year of strong revenue growth, stating, “It will be a year where we should focus more on profitability and operational efficiency than on growth.”
The executive indicated that the number of stores is likely to decrease, as Lavoro plans to close more sales points than it opens. According to him, in some areas, a single unit may suffice to serve the region, leading to additional closures and a focus on areas where optimization is possible. He noted that this is still under discussion.
