Lavoro (LVRO) Q2 2025 Preliminary Call earnings summary

Macroeconomic and Industry Challenges

• Brazil's ag inputs market faced severe price deflation, drought, and liquidity constraints, intensified by a major retailer's judicial reorganization in late 2024.

• Product supply disruptions and inventory shortages during the critical soybean crop season led to significant order cancellations and impacted Q2 and Q3 results.

• Brazil's 2023/24 crop year was marked by falling commodity prices and restricted farmer liquidity.

• Market stabilization signs are emerging, but inventory financing conditions remain challenging.

Out-of-court Restructuring and Reorganization Plan

• Out-of-court restructuring agreement reached with key suppliers, extending payment terms and securing multi-year product supply for Brazil Ag Retail, pending court approval.

• The plan restructures approximately BRL 2.5 billion in supplier payables, with repayments over 2–5 years, and introduces a standardized multi-year contractual framework.

• Supply and financing terms are already in effect, resuming normal inventory flow in Q4; the plan is limited to Lavoro Brazil and does not affect other subsidiaries or financial creditors.

• The plan, known as extrajudicial reorganization, will become binding on all eligible suppliers upon court approval, with ongoing advanced discussions with other suppliers.

• EJ Plan filed with São Paulo court; upon approval, will standardize supplier terms and release guarantees.

Financing Innovation and Operational Changes

• The plan introduces a new FIDC backed by receivables to streamline financing and support operational efficiencies.

• Multi-year inventory supply and financing framework established with supporting creditors.

• Court approval is expected in 3–5 months, but the agreement is already in effect.