Slc Agricola ((SLCJY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call of SLC Agricola showcased a robust financial performance, marked by strategic advancements and effective cost management. Despite these positive highlights, concerns were raised regarding increased leverage and market volatility, particularly in the cotton, soybean, and corn sectors.
Strong Financial Performance
SLC Agricola reported a commendable financial performance for Q1 2025, with net revenue reaching BRL2.3 billion, marking a 19.1% increase compared to the same period in 2024. This growth was driven by record volume invoiced. The company’s adjusted EBITDA soared to BRL943 million, maintaining a margin of 40.5%, while net income surged by 123.1% to BRL510.7 million.
Successful Cost Management
The company achieved significant cost reductions, with the estimated cost per hectare for the ’24-25 harvest projected to decline by 5.4% compared to the previous forecast. This reflects a 10% reduction in costs compared to the previous season, highlighting SLC Agricola’s effective cost management strategies.
Significant Advancements in Hedging
SLC Agricola made notable progress in its hedging strategies, with 83.8% of soybean, 50.6% of corn, and 49.6% of cotton for the ’24-25 crop successfully hedged. Favorable exchange rates played a crucial role in offsetting declines in commodity prices.
Expansion in Planted Area
The acquisition of Sierentz Agro Brasil is set to facilitate a 13.6% growth in SLC Agricola’s planted area. This strategic move aims to diversify the company’s land portfolio, thereby mitigating climate-related risks.
Increased Leverage
The company’s adjusted net debt rose to BRL5.2 billion, an increase of BRL1.5 billion from 2024. This was primarily due to investments and the payment of crop inputs, resulting in a net debt over adjusted EBITDA ratio of 2.27x.
Cotton Market Instability
The cotton market faced instability, with prices closing April at approximately BRL0.66 per pound. This reflects global economic challenges and adverse weather conditions in the U.S., which significantly impacted production.
Challenges in the Soybean and Corn Markets
Soybean prices experienced volatility due to tariffs between the U.S. and China. Additionally, the global corn market is projected to show a deficit of 1.1 million tons for the ’25-26 season, posing challenges for SLC Agricola.
Forward-Looking Guidance
Looking ahead, SLC Agricola provided detailed guidance, forecasting a global surplus of 4.4 million bags of cotton for the ’24-’25 harvest. Despite adverse weather, Brazil’s cotton production is expected to rise by 5.1% to 3.9 million tons. Soybean production is projected to exceed consumption globally by 10.6 million tons, with Brazil anticipating a record 169 million tons. The company is also preparing for a 13.6% growth in planted area for the ’25-’26 season, following strategic acquisitions.
In summary, SLC Agricola’s earnings call highlighted a strong financial performance and strategic advancements, despite challenges in leverage and market volatility. The company’s effective cost management and hedging strategies, along with its expansion plans, position it well for future growth.