SLC Agrícola (SLCE3) Q2 2024 earnings summary

Executive summary

• Net revenue and profitability declined in 2Q24 and 1H24 due to lower soybean yields and prices, but cotton revenue and yields surged, partially offsetting losses.

• Brazil became the world's leading cotton exporter in 2022-2023, with 3.2 million tons produced and 2.7 million tons exported by July, mainly to Asia.

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

• Crop yields for soybean, corn, and cotton outperformed national averages in 2023/24, despite weather and pest challenges.

• International cotton prices declined due to global surpluses, but demand for clothing and textiles remains strong.

Financial highlights

• Net revenue for 2Q24 was R$1.35–1.4 billion, down 6.4% year-over-year, mainly due to lower soybean sales; cotton revenue rose 73%.

• Net income for 2Q24 was R$321–348.7 million; 1H24 net income was R$550–550.4 million, down 40.4% year-over-year.

• Adjusted EBITDA for 1H24 was R$962–962.3 million, with a margin of 29.1%, down 37.6% year-over-year.

• Cash flow from operations in 2Q24 was negative R$543 million, mainly due to reduced soybean production and input payments.

• Gross margin in 1H24 was 44.7%, down from 51.9% in 1H23.

Outlook and guidance

• For 2024/25, nearly all fertilizer and crop protection inputs have been secured, with 99% phosphates, 100% potash, 97% nitrogen, and 96.8% pesticides acquired.

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

• Cost per hectare is expected to decline compared to the previous year, with final figures pending soil analysis.

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

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