SLC Agrícola (SLCE3) Q2 2024 earnings summary

Executive summary

• Net revenue for 2Q24 was R$1.35 billion, down 6.4% year-over-year, mainly due to lower soybean yields and prices, but partially offset by a 73.2% increase in cotton sales volume and higher cotton prices.

• Adjusted EBITDA for 1H24 was R$962 million (29.1% margin), down 37.6% year-over-year, reflecting lower gross income from soybeans despite record cotton yields.

• Net income for 1H24 was R$550 million, down 40.4% year-over-year, primarily due to reduced gross income from soybeans and lower commodity prices.

• Cash generation in 2Q24 was negative R$543 million, mainly due to lower soybean revenue, input purchases, and investments for the next crop year.

• Expansion initiatives, including new joint ventures and land leases, increased potential planted area by up to 60,000 hectares for 2024/25.

Financial highlights

• 1H24 net revenue was R$3.31 billion, down 9.7% year-over-year; 2Q24 net revenue was R$1.35 billion, down 6.4%.

• Gross margin declined to 44.7% in 1H24 from 51.9% in 1H23; 2Q24 gross margin was 61.5%.

• Adjusted EBITDA for 1H24 was R$962 million (29.1% margin), down from R$1.54 billion (42.1%) in 1H23.

• Net income for 1H24 was R$550 million, down 40.4% year-over-year; 2Q24 net income was R$321 million.

• Cash flow from operations in 1H24 was negative R$386.1 million; 2Q24 cash generation was negative R$543 million.

Outlook and guidance

• For 2024/25, input acquisition is advanced: 99% phosphates, 100% potassium chloride, 97% nitrogen, and 96.8% crop protection acquired.

• Hedge positions for 2024/25: 61.3% of estimated soybean, 9.4% cotton, and no significant corn hedge yet.

• Expansion of partnerships and new leases will increase the potential arable area by up to 60,000 hectares for the 2024/25 crop year.

• Cost per hectare is expected to decline compared to the previous year, but final figures will be available after soil analysis and planning.

• Yields are expected to continue improving due to digital crop management and operational enhancements.