Verde Provides Update

Belo Horizonte, Brazil. Verde AgriTech Ltd (TSX: “NPK”) (“OTCMKTS: “VNPKF“) (“Verde” or the “Company”) informs that roadworks it was performing for increased truck accessibility to and from its second plant (“Plant 2”)[1] incurred unforeseen groundwater issues. The solution is already engineered and being implemented. As a consequence, over the next 4 to 8 weeks, limited delivery of Plant 2’s production will be possible, with an impact to the Company’s 2022 results.

Plant 2 is ramping up production to 1.2 million tonnes per year (“Mtpy”) of Verde’s multinutrient potassium product, K Forte®, sold internationally as Super Greensand® (the “Product”). As part of Plant 2’s logistics, the Company has been upgrading road infrastructure, including 22 kms of roads, 14 kms of asphalting, and the construction of a new bridge. At its peak, the Company employed 350 people in the construction works of Plant 2 and correlated infrastructure, currently 125 people are working on the road foundation to overcome the groundwater issues.

The unforeseen groundwater, which placed in risk structural stability, was detected in two critical points of the road. The preceding geotechnical drilling had not uncovered the risk areas and palliative groundworks proved insufficient to adequately remediate the situation. The revamped foundation work will delay the road’s operability. Therefore, the renewed road will only support Plant 2’s output in Q4 2022.

 

2022 Guidance

Brazilian agricultural seasonality sees peak demand for Product in Q3 and early Q4. Plant 1 is operating at capacity to meet that demand but Plant 2’s delayed output will miss most of the 2022 season’s peak demand, thereby negatively impacting the Company’s full year volume. Verde is still in line to meet its original 2022 Guidance,[2] as revised below for Q3 and Q4 in comparison with the realized results for Q1 and Q2 2022:

 

Period Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022
Guidance Original Jan 2022 Achieved in Q1 2022 Original Jan 2022 Achieved in Q2 2022 Original Jan 2022 Revised Sep 2022 Original Jan 2022 Revised Sep 2022 Original Jan 2022 Revised Sep 2022
EPS (C$) 0.02 0.06 0.18 0.19 0.25 0.12 0.06 0.13 0.50 0.50
EBITDA (C$’000)[3] 1,358 3,678 10,155 10,765 13,414 8,040 3,506 8,808 28,433 31,291
Revenue (C$’000) 10,070 11,304 21,954 24,861 27,228 24,691 13,011 25,762 72,263 86,618
Sales target (tonnes) 115,000 111,667 200,000 202,255 250,000 188,000 135,000 198,078 700,000 700,000

Following the lower than expected deliveries from Plant 2 because of logistical issues during Q3 2022, the original 2022 annual Guidance is expected to be achieved thanks to Plant 1’s continued operation at capacity and Plant 2´s successful commissioning and dispatch of Product within the next 4 to 8 weeks.

Client´s demand for Product continues to outstrip current delivery capacity. The Company is offering discounts for Q4 2022 and Q1 2023 delivery, in order to maximise Plant 2 output in those seasonally weak months, as well as to generate more market penetration.

For 2023, Verde’s sales volume target remains unchanged at a minimum of 2 Mtpy tonnes of Product. Construction of Plant 3, which is expected to add a further 10 Mtpy of Product, is pending government permits and is therefore expected to begin construction in 2024.

 

Plant 1 and 2 Capacity Expansion

Over the years, Verde has optimized processing routes and machinery calibration.  Therefore, in light of such experience, both Plants 1 and 2 are being re-assessed to determine how equipment and process optimization will enable increased production volumes beyond their current nominal capacities. To implement the potential upgrades, Verde will apply for relevant government licences for total Plant 1 and 2 capacity exceeding 2.8 Mtpy.

 

Paid for Growth

Paid for Growth (“P4G”) strategy, a cornerstone program aimed at distributing gains to shareholders either through share buyback or dividends,[4] will be withheld for 2022 in order to ensure Verde’s continued accelerated expansion, including Plant 2 and Plant 3, without issuance of new shareholder-diluting equity. P4G is expected to distribute Verde’s first gains to shareholders in 2023.

“While it is disappointing to face a delay at the very end of what has otherwise been a ´non-equity financed´ construction of Plant 2, we are pleased by the overall pace and safety of the endeavour. Supported by the growing demand from current and new clients, at Verde we look forward to a future of sustainable and steadily expanding production. In that spirit, we celebrate our Plant 2´s commissioning and our 2022 outlook for over 70% year-on-year growth of production. We hold our heads high and look forward to advance the P4G strategy and lead our market segment in Brazil in the near future,” commented Verde’s Founder, President & CEO, Cristiano Veloso.

 

Board Revision

Verde is concluding a renewal of its Board of Directors to better meet the threshold set by certain shareholder advisory firms, which have deemed part of its Board as ‘non-independent directors’ either because the directors hold too many shares in the Company or the directors have held extensive tenures. Therefore, the following directors will gracefully step down: Mr. Getúlio Fonseca, Mr. Paulo Sérgio Ribeiro and Mr. Michael St Aldwyn, who have served on the board of Verde over a combined 24 years.

Mr. Fonseca was appointed to the Board in 2007 and was a contributing member of the Audit Committee and the Chairman of the Compensation Committee.

Mr. Ribeiro was appointed to the Board in 2017 and was a contributing member of the Corporate Governance & Nominating Committee.

Mr. St Aldwyn was appointed to the Board in 2018 and was a contributing member of the Audit Committee, and Compensation Committee, also serving as the Chairman of the Corporate Governance & Nominating Committee, and as Lead Independent Director.

“We would like to thank Getúlio Fonseca, Paulo Sérgio Ribeiro and Michael St Aldwyn for their many years of service and contribution to Verde’s growth. Their experience and inputs were invaluable to the Company, for which I thank them on behalf of Verde’s team, our shareholders and stakeholders,” commented Mr. Veloso.

The Company will seize the opportunity to enhance Board diversity and, in light of Verde’s recent move to Singapore,[5] to comply with local regulations that mandate that at least one board member needs to be a Singaporean resident. The Board changes are expected to be concluded and announced in the following weeks, without material impact to Verde’s ongoing expansionary strategies.

 

About Verde AgriTech

Verde is an agricultural technology company that produces potash fertilizers. Our purpose is to improve the health of all people and the planet. Rooting our solutions in nature, we make agriculture healthier, more productive, and profitable.

Verde is a fully integrated company, from the mining and processing its main feedstock from its 100% owned mineral properties, to the Product sales processes, which also include direct technical advice for farmers, and distribution.

Verde’s focus on research and development has resulted in one patent and eight patents pending. Among its proprietary technologies are Cambridge Tech, 3D Alliance, MicroS Technology, N Keeper, and Bio Revolution.[6] Currently, the Company is fully licensed to produce up to 2.8 million tonnes per year of its multinutrient potassium fertilizers K Forte® and BAKS®, sold internationally as Super Greensand®.[7] By the end of 2022, it plans to become Brazil’s largest potash producer by capacity.[8] Verde has a combined measured and indicated mineral resource of 1.47 billion tonnes at 9.28% K2O and an inferred mineral resource of 1.85 billion tonnes at 8.60% K2O (using a 7.5% K2O cut-off grade).[9] This amounts to 295.70 million tonnes of potash in K2O. For context, in 2021 Brazil’s total consumption of potash in K2O was 7.92 million.[10]

Brazil ranks second in global potash demand and is its single largest importer, currently depending on external sources for over 96% of its potash needs. In 2021, potash accounted for approximately 2% of all Brazilian imports by dollar value.

 

Corporate Presentation

For further information on the Company, please view shareholders’ deck:

https://verde.docsend.com/view/7ifqptdkh55cutpk

 

Investors Newsletter

Subscribe to receive the Company’s updates at:

http://cloud.marketing.verde.ag/InvestorsSubscription

The last edition of the newsletter can be accessed at: https://bit.ly/InvestorsNewsletter-July2022

 

Cautionary Language and Forward-Looking Statements

All Mineral Reserve and Mineral Resources estimates reported by the Company were estimated in accordance with the Canadian National Instrument 43-101 and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards (May 10, 2014). These standards differ significantly from the requirements of the U.S. Securities and Exchange Commission. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

This document contains “forward-looking information” within the meaning of Canadian securities legislation and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. This information and these statements, referred to herein as “forward-looking statements” are made as of the date of this document. Forward-looking statements relate to future events or future performance and reflect current estimates, predictions, expectations or beliefs regarding future events and include, but are not limited to, statements with respect to:

  • the estimated amount and grade of Mineral Resources and Mineral Reserves;
  • the PFS representing a viable development option for the Project;
  • estimates of the capital costs of constructing mine facilities and bringing a mine into production, of sustaining capital and the duration of financing payback periods;
  • the estimated amount of future production, both produced and sold;
  • timing of disclosure for the PFS and recommendations from the Special Committee;
  • the Company’s competitive position in Brazil and demand for potash; and,
  • estimates of operating costs and total costs, net cash flow, net present value and economic returns from an operating mine.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives or future events or performance (often, but not always, using words or phrases such as “expects”, “anticipates”, “plans”, “projects”, “estimates”, “envisages”, “assumes”, “intends”, “strategy”, “goals”, “objectives” or variations thereof or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

All forward-looking statements are based on Verde’s or its consultants’ current beliefs as well as various assumptions made by them and information currently available to them. The most significant assumptions are set forth above, but generally these assumptions include, but are not limited to:

  • the presence of and continuity of resources and reserves at the Project at estimated grades;
  • the geotechnical and metallurgical characteristics of rock conforming to sampled results; including the quantities of water and the quality of the water that must be diverted or treated during mining     operations;
  • the capacities and durability of various machinery and equipment;
  • the availability of personnel, machinery and equipment at estimated prices and within the estimated delivery times;
  • currency exchange rates;
  • Super Greensand® and K Forte® sales prices, market size and exchange rate assumed;
  • appropriate discount rates applied to the cash flows in the economic analysis;
  • tax rates and royalty rates applicable to the proposed mining operation;
  • the availability of acceptable financing under assumed structure and costs;
  • anticipated mining losses and dilution;
  • reasonable contingency requirements;
  • success in realizing proposed operations;
  • receipt of permits and other regulatory approvals on acceptable terms; and
  • the fulfilment of environmental assessment commitments and arrangements with local

Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Many forward-looking statements are made assuming the correctness of other forward looking statements, such as statements of net present value and internal rates of return, which are based on most of the other forward-looking statements and assumptions herein. The cost information is also prepared using current values, but the time for incurring the costs will be in the future and it is assumed costs will remain stable over the relevant period.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that estimates, forecasts, projections and other forward-looking statements will not be achieved or that assumptions do not reflect future experience. We caution readers not to place undue reliance on these forward-looking statements as a number of important factors could cause the actual outcomes to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates assumptions and intentions expressed in such forward-looking statements. These risk factors may be generally stated as the risk that the assumptions and estimates expressed above do not occur as forecast, but specifically include, without limitation: risks relating to variations in the mineral content within the material identified as Mineral Resources and Mineral Reserves from that predicted; variations in rates of recovery and extraction; the geotechnical characteristics of the rock mined or through which infrastructure is built differing from that predicted, the quantity of water that will need to be diverted or treated during mining operations being different from what is expected to be encountered during mining operations or post closure, or the rate of flow of the water being different; developments in world metals markets; risks relating to fluctuations in the Brazilian Real relative to the Canadian dollar; increases in the estimated capital and operating costs or unanticipated costs; difficulties attracting the necessary work force; increases in financing costs or adverse changes to the terms of available financing, if any; tax rates or royalties being greater than assumed; changes in development or mining plans due to changes in logistical, technical or other factors; changes in project parameters as plans continue to be refined; risks relating to receipt of regulatory approvals; delays in stakeholder negotiations; changes in regulations applying to the development, operation, and closure of mining operations from what currently exists; the effects of competition in the markets in which Verde operates; operational and infrastructure risks and the additional risks described in Verde’s Annual Information Form filed with SEDAR in Canada (available at www.sedar.com) for the year ended December 31, 2021. Verde cautions that the foregoing list of factors that may affect future results is not exhaustive.

When relying on our forward-looking statements to make decisions with respect to Verde, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Verde does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by Verde or on our behalf, except as required by law.

For additional information please contact:

Cristiano Veloso, Founder, Chairman & Chief Executive Officer

Tel: +55 (31) 3245 0205; Email: investor@verde.ag

www.investor.verde.ag | www.supergreensand.com | www.verde.ag

 

[1] See press release at: https://investor.verde.ag/verde-announces-commissioning-of-its-plant-2/

[2] See press release at: https://investor.verde.ag/verde-announces-2022-guidance-and-two-year-outlook/

[3] Before non-cash events.

[4] See press release at: https://investor.verde.ag/verde-announces-plans-for-first-distribution-of-gains-and-restructure/

[5] See release at: https://investor.verde.ag/verde-announces-completion-of-redomiciliation-process-to-singapore/

[6] Learn more about our technologies: https://verde.docsend.com/view/yvthnpuv8jx6g4r9

[7] See the release at: https://investor.verde.ag/2-5-million-tonnes-per-year-potash-mining-concession-granted-to-verde/

[8] See the release at: https://investor.verde.ag/verde-to-reach-3-million-tonnes-potash-production-capacity-in-2022/

[9] As per the National Instrument 43-101 Standards of Disclosure for Mineral Projects within Canada (“NI 43 -101”), filed on SEDAR in 2017. See the Pre-Feasibility Study at: https://investor.verde.ag/wp-content/uploads/2021/01/NI-43-101-Pre-Feasibility-Technical-Report-Cerrado-Verde-Project.pdf

[10] Union of the Agricultural Fertilizers and Correctives Industry, in the State of São Paulo (“SIACESP”, from Sindicato da Indústria de Fertilizantes e Corretivos Agropecuários, no Estado de São Paulo).

Verde’s Q1 2022 revenue grows 1,260%

Results surpass EPS guidance by 254%

 

Belo Horizonte, Brazil. Verde AgriTech Plc (TSX: “NPK”) (OTCQB: “AMHPF”) (“Verde” or the “Company”) is pleased to announce its financial results for the first quarter of 2022 (“Q1 2022”).

Q1 2022 Financials

  • Revenue increased by 1,260% in Q1 2022, to $11,304,000 compared to $831,000 in Q1 2021.
  • Revenue in Brazilian Real (“R$”) increased by 1,196% in Q1 2022, to R$46,627,000 compared to R$3,597,000 in Q1 2021.
  • Sales by volume increased by 574% in Q1 2022, to 111,667 tonnes sold compared to 16,558 tonnes sold in Q1 2021.
  • Gross margin increased to 77% in Q1 2022, compared to 41% in Q1 2021.
  • EBITDA before non-cash events increased to $3,678,000 in Q1 2022, compared to an operating loss of $887,000 in Q1 2021.
  • Net profit increased to $3,033,000 in Q1 2022, compared to a net loss of $1,811,000 in Q1 2021.

Subsequent Events

  • In April 2022, the Company announced that Plant 2 was on track to start production in Q3 2022, initially with a 1,200,000 tpy production capacity, as announced by the Company in the press release published on March 03, 2022. The final Plant 2 capacity of 2,400,000 tpy is expected to be reached in Q4 2022. Therefore, by Q4 2022, with Plant 2’s expansion, overall production capacity is expected to be 3,000,000 tpy, establishing Verde as Brazil’s largest potash producer.
  • In April 2022, the Market Study (the “Study”) that will underpin the preparation of the New Pre-Feasibility Study announced by the Company on March 01, 2021 (the “PFS”) was concluded. The Study calculated the potential Brazilian agricultural market for potash, sulphur, and the micronutrients zinc, boron, copper and manganese. The Study was conducted between May 2021 and March 2022, it will be an integral part of the PFS. The PFS will contemplate a scenario of total annual production of up to 50,000,000 tonnes per year (“tpy”) of Verde’s Product, equivalent to 63% of the total Brazilian potash consumption in 2021.
  • In April 2022, Bio Revolution, Verde’s newest technology that enables the incorporation of microorganisms to mineral fertilizers, was launched by the Company.[1]​ K Forte® will be the first fertilizer in the world to use Bio Revolution technology. Bacillus aryabhattai, widely renowned in agriculture for its multiple benefits, will be the first microorganism to be incorporated into Verde’s Product. ​Verde’s Plant 1 is already equipped with a facility for deploying Bio Revolution. At Plant 2, a proportionally larger Bio Revolution facility will be built, with operations expected by the end of 2022.​
  • In May 2022, Verde announced an increase in its 2022 guidance, previously published on January 10, 2022. The revised 2022 guidance provides for sales of 1,000,000 tonnes of Verde’s multinutrient potassium products, BAKS® and K Forte® sold internationally as Super Greensand® (the “Product”), with revenue of C$109.09 million, EBITDA of C$49.06 million and net earnings per share (“EPS”) of C$0.87. The 2023 guidance provides for sales of 2,000,000 tonnes.

 

“2022 has started in a very shaky manner for the agricultural market globally. In Brazil, which depends on imports for over 96% of its potash supplies, the concern with fertilizers has been at the forethought of most farmers. Despite the record rainfalls during the period, which postponed Verde’s delivery of an additional 25,133 tonnes of Product in Q1 2022, our Team successfully reached a growing portion of Brazil’s market. Verde’s target towards the delivery of 1,000,000 tonnes by the end of 2022 is further boosted by these latest results.”  declared Verde’s Founder, President & CEO Cristiano Veloso.

2022 Guidance

On May 03, 2022, Verde announced an increase in its 2022 and 2023 guidance,[2] previously published on January 10, 2022.[3] The Company’s original and revised 2022 targets are detailed on a quarterly basis, to reflect the market demand’s seasonality, as follows:

 

Period Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022
Guidance Original
Jan 2022
Achieved
in Q1 2022
Original
Jan 2022
Revised
May 2022
Original
Jan 2022
Revised
May 2022
Original
Jan 2022
Revised
May 2022
Original
Jan 2022
Revised
May 2022
EPS (C$) 0.02 0.06 0.18 0.21 0.25 0.35 0.06 0.25 0.50 0.87
EBITDA (C$’000)[4] 1,358 3,678 10,155 11,808 13,414 19,259 3,506 14,319 28,434 49,065
Revenue (C$’000) 10,070 11,304 21,954 22,902 27,228 40,121 13,011 34,769 72,263 109,097
Sales target (tonnes) 115,000 111,667 200,000 200,000 250,000 353,718 135,000 334,615 700,000 1,000,000

 

The 2022 guidance is underpinned by the following assumptions:

  • Average Brazilian Real (“R$”) to Canadian Dollar exchange rate: C$1.00 = R$4.40
  • Verde’s Product CIF and FOB average price for the full year, including delivered orders, committed orders and projected orders: C$109 per tonne
  • Sales Incoterms: 50% CIF and 50% FOB
  • Sales channels: 40% direct sales and 60% indirect sales

 

2023 Guidance

For 2023, Verde’s updated sales volume target is 2,000,000 tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

Period FY 2023
Guidance Original
Jan 2022
Revised
May 2022
Sales target (tonnes) 1,400,000 2,000,000

 

 

Selected Annual Financial Information

The table below summarizes Q1 2022 financial results compared to Q1 2021:

All amounts in
CAD $’000
Q1 2022 Q1 2021
Tonnes sold ‘000 112 17
Revenue per tonne sold $ 101 50
Production cost per tonne sold $ (24) (30)
Gross Profit per tonne sold $ 77 20
Gross Margin 77% 41%
 
Revenue 11,304 831
Production costs (2,654) (490)
Gross Profit 8,650 341
Gross Margin 77% 41%
Sales and product delivery
freight expenses
(3,931) (531)
General and administrative expenses (1,041) (697)
EBITDA (1) 3,678 (887)
Share Based and Bonus
Payments (Non-Cash Event) (2)
(64) (822)
Depreciation and Amortisation (2) (26) (5)
Profit on disposal of plant and
equipment (2)
9
Operating Profit / (loss) after
non-cash events
3,588 (1,705)
Interest Income/Expense (185) (75)
Net Profit / (Loss) before tax 3,403 (1,780)
Income tax (370) (31)
Net Profit / (Loss) 3,033 (1,811)

 

(1) – Non GAAP measure
(2) – Included in General and Administrative expenses in financial statements

 

External Factors

Revenue and costs are affected by external factors, including changes in the exchange rates between the C$ and R$ along with fluctuations in potassium chloride CIF (Minas Gerais) prices. The table below summaries these changes.

Change % 3 months ended
Mar 31, 2022
3 months ended
Mar 31, 2021
Canadian Dollar (C$)
Average Exchange Rate
-5% R$4.12 R$4.33
Potassium Chloride CIF
(Minas Gerais) Lowest Price(1)
+154% US$800 US$315
Potassium Chloride CIF
(Minas Gerais) Highest Price(1)
+204% US$1,200 US$395

 

(1) – Source: Acerto Limited Report.

 

Net Profits and EPS

The Company generated a net profit of $3,033,000 for Q1 2022, an increase of $4,844,000 compared to a net loss of $1,811,000 for Q1 2021. The basic earnings per share was $0.060 for Q1 2022, compared to loss per share of $0.036 for Q1 2021.

 

Product Sales

Sales by volume increased by 574% in Q1 2022, to 111,667 tonnes sold compared to 16,558 tonnes sold in Q1 2021.

 

Revenue

Revenue from sales increased by 1,260% in Q1 2022, to $11,304,000 from the sale of 111,667 tonnes of the Product, at $101 per tonne sold; compared to $831,000 in Q1 2021 from the sale of 16,558 tonnes of the Product, at $50 per tonne sold.

Revenue per tonne excluding freight expenses (FOB price) improved by 105% in Q1 2022, to $75 compared to $36 in Q1 2021.

The KCl price increased by 204% in Q1 2022, compared to Q1 2021. Verde did not, however, see a proportional increase in its pricing for Q1 2022 sales because it had sold part of its Q1 production in Q4 2021 and discounts are applied.

Revenue per tonne in Q1 2022 was higher than Q1 2021 mainly due to:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 34% of total sales in Q1 2021 to 60% in Q1 2022.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$315-395 per tonne in Q1 2021 to US$800-US$1,200 per tonne in Q1 2022 (as reported by Acerto Limited, a market intelligence firm).

 

Production costs

Production costs include all direct costs from mining, processing, and the addition of other nutrients to the Product, such as Sulphur and Boron. They also include the logistics costs from the mine to the factory and related salaries.

Production costs increased by 442% in Q1 2022, to $2,654,000 compared to $490,000 in Q1 2021. This was due to a 574% increase in volume sold, from 16,558 tonnes in Q1 2022 to 111,667 tonnes in Q1 2021. Cost per tonne decreased by 20% in Q1 2022, to $24 compared to $30 in Q1 2021. This reduction was mainly driven by fixed cost dilution in Q1 2022.

 

Sales Expenses

CAD $’000 Q1 2022 Q1 2021
Sales and marketing expenses (822) (293)
Fees paid to independent sales agents (136) (9)
Product delivery freight expenses (2,973) (229)
Total (3,931) (531)

 

Sales and marketing expenses

Sales and marketing expenses include employees’ salaries, car rentals, travel within Brazil, hotel expenses, customer relationship management (CRM) software licenses, and the promotion of the Product in marketing events.

Expenses increased by 181% in Q1 2022, to $822,000 compared to $293,000 in Q1 2021, mainly due to a further expansion of Verde’s sales and marketing team, with professional headcount in the team increasing from an average of 43 in Q1 2021 to 62 in Q1 2022. This increase is in line with the Company’s accelerated growth strategy.

 

Fees paid to independent sales agents

As part of Verde’s marketing and sales strategy, the Company pays out commissions to its independent sales agents.

Fees paid to independent sales agents increased by 1431% in Q1 2022, to $136,000 compared to $9,000 in

Q1 2021, as a direct result of increased sales and higher volume sold by sales agents compared to internal sales and distributors.

 

Product delivery freight expenses

Product delivery freight expenses increased by 1197% in Q1 2022, to $2,973,000 compared to $229,000 in Q1 2021, as the Company has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 34% of total sales in Q1 2021 to 60% in Q1 2022 and due to higher fuel prices, which increased 44% in Q1 2022 compared to Q1 2021.

 

General and Administrative Expenses

CAD $’000 Q1 2022 Q1 2021
General administrative expenses (410) (478)
Legal, professional, consultancy
and audit costs
(411) (159)
IT/Software expenses (204) (52)
Taxes and licenses fees (16) (8)
Total (1,041) (697)

 

General administrative expenses

These costs include general office expenses, rent, bank fees, insurance, foreign exchange variances and remuneration of executive and administrative staff in Brazil.

Expenses decreased by 14% in Q1 2022, to $410,000 compared to $478,000 in Q1 2021 mainly due to incentive compensation to the key management in Q1 2021.

Despite the reduction, salary costs have increased in 2022 as they include additional administrative employees, with professional headcount in the team increasing from an average of 26 in Q1 2021 to 57 in Q1 2022 to help support the Company’s growth.

 

Legal, professional, consultancy and audit costs

Legal and professional fees include legal, professional, consultancy fees along with accountancy, audit and regulatory costs. Consultancy fees are consultants employed in Brazil, such as accounting services, patent process, lawyer’s fees and regulatory consultants.

Expenses increased by 159% in Q1 2022, to $411,000 compared to $159,000 in Q1 2021, due to higher expenses with environmental, legal, accounting, and IT consultancies.

 

IT/Software expenses

IT/Software expenses include software licenses such as Microsoft Office, Customer Relationship Management (CRM) software and enterprise resource planning (ERP).

Expenses increased by 290% in Q1 2022, to $204,000 compared to $52,000 in Q1 2022, mainly due to CRM and ERP consultants services.

 

Taxes and licences

Taxes and licence expenses include general taxes, product branding and licence costs.

Expenses increased in Q1 2022, to $16,000 compared to $8,000 in Q1 2022.

 

Share Based and Bonus Payments (Non-Cash Event)

These costs represent the expense associated with stock options granted to employees and directors and non-cash bonuses paid to key management.

Share Based Payments costs decreased by 92% in Q1 2022, to $64,000 compared to $822,000 in Q1 2021.

 

Q1 2022 Results Conference Call

The Company will host a conference call on Wednesday, May 25, 2022, at 09:00 am Eastern Time, to discuss Q4 and FY 2021 results and provide an update. Subscribe using the link below and receive the conference details by email.

Date: Wednesday, May 25, 2022
Time: 09:00 am Eastern Time
Subscription link: https://bit.ly/Q1-2022_Results_Presentation

The questions can be submitted in advance through the following link up to 48 hours before the conference call: https://bit.ly/VerdeAgriTech-Q1_2022-questions

The Company’s first quarter financial statements and related notes for the period ended March 31, 2021 are available to the public on SEDAR at www.sedar.com and the Company’s website at www.investor.verde.ag/.

 

About Verde AgriTech

Verde is an agricultural technology Company that produces potash fertilizers. Our purpose is to improve the health of all people and the planet. Rooting our solutions in nature, we make agriculture healthier, more productive, and profitable.

Verde is a fully integrated Company:  it mines and processes its main feedstock from its 100% owned mineral properties, then sells and distributes the Product.

Verde’s focus on research and development has resulted in one patent and eight patents pending. Among its proprietary technologies are Cambridge Tech, 3D Alliance, MicroS Technology, N Keeper, and Bio Revolution.[5] Currently, the Company is fully licensed to produce up to 2.8 million tonnes per year of its multinutrient potassium fertilizers K Forte® and BAKS®, sold internationally as Super Greensand®.[6]

By the end of 2022, Verde aims to become Brazil’s largest potash producer by capacity.[7] Verde has a combined measured and indicated mineral resource of 1.47 billion tonnes at 9.28% K2O and an inferred mineral resource of 1.85 billion tonnes at 8.60% K2O (using a 7.5% K2O cut-off grade).[8] This amounts to 295.70 million tonnes of potash in K2O. For context, in 2021 Brazil’s total consumption of potash in K2O was 7.92 million.[9]

Brazil ranks second in global potash demand and is its single largest importer, currently depending on external sources for over 96% of its potash needs. In 2021, potash accounted for approximately 2% of all Brazilian imports by dollar value.

 

Corporate Presentation

For further information on the Company, please view shareholders’ deck: https://verde.docsend.com/view/tr4c6e5qhjr442t3

 

Investors Newsletter

Subscribe to receive the Company’s updates at:

http://cloud.marketing.verde.ag/InvestorsSubscription

The last edition of the newsletter can be accessed at: https://bit.ly/InvestorsNL-April2022

 

Cautionary Language and Forward-Looking Statements

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. The Cautionary Language and Forward-Looking Statements can be accessed at this link.

 

For additional information please contact:

Cristiano Veloso, President, Chairman & Chief Executive Officer

Tel: +55 (31) 3245 0205; Email: investor@verde.ag

www.investor.verde.ag | www.supergreensand.com | www.verde.ag

 

[1] See the release at: https://investor.verde.ag/verde-launches-bio-revolution/

[2] See the release at: https://investor.verde.ag/verdes-2022-guidance-and-two-year-outlook-revised-upwards/

[3] See the release at: https://investor.verde.ag/verde-announces-2022-guidance-and-two-year-outlook/

[4] Before non-cash events.

[5] Learn more about our technologies: https://verde.docsend.com/view/yvthnpuv8jx6g4r9

[6] See the release at: https://investor.verde.ag/2-5-million-tonnes-per-year-potash-mining-concession-granted-to-verde/

[7] See the release at: https://investor.verde.ag/verde-to-reach-3-million-tonnes-potash-production-capacity-in-2022/

[8] As per the National Instrument 43-101 Standards of Disclosure for Mineral Projects within Canada (“NI 43 -101”), filed on SEDAR in 2017. See the Pre-Feasibility Study at: https://investor.verde.ag/wp-content/uploads/2021/01/NI-43-101-Pre-Feasibility-Technical-Report-Cerrado-Verde-Project.pdf

[9] Union of the Agricultural Fertilizers and Correctives Industry, in the State of São Paulo (“SIACESP”, from Sindicato da Indústria de Fertilizantes e Corretivos Agropecuários, no Estado de São Paulo).

Verde’s 2022 guidance and two-year outlook revised upwards

New EPS guidance grows 74%

 

Belo Horizonte, Brazil. Verde AgriTech Plc (TSX: “NPK”) (OTCQB: “AMHPF”) (“Verde” or the “Company”) is pleased to announce an increase in its 2022 and 2023 guidance, previously published on January 10, 2022[1]. The new 2022 guidance provides for sales of 1,000,000 tonnes of Verde’s multinutrient potassium products, BAKS® and K Forte® sold internationally as Super Greensand® (the “Product”), with revenue of C$109.09 million, EBITDA of C$49.06 million and net earnings per share (“EPS”) of C$0.87. The 2023 guidance provides for sales of 2,000,000 tonnes.

The original target for 2022 was for sales of 700,000 tonnes of Product, with revenue of $72.26 million, EBITDA of $28.43 million, EPS of $0.50. The original target for 2023 was for sales of 1,400,000 tonnes of Product. If achieved, the new revenue target for 2022 will represent a Year-on-Year (“YoY”) growth of 294%.

 

2022 Guidance

The Company’s revised full year 2022 guidance is compared to the original targets and the 2021 results, as follows:

 

2021 Results 2022 Guidance
Guidance Published

March 22, 2022[2]

Original

January 10, 2022

Revised

May 03, 2022

EPS (C$) 0.07 0.50 0.87
EBITDA (C$’000)[3] 6,450 28,434 49,065
Revenue (C$’000) 27,709 72,263 109,097
Sales (tonnes) 400,133 700,000 1,000,000

 

The detailed quarterly targets will be updated along with Q1 2022 results, to be released on May 16, 2021.

 

2023 Guidance

For 2023, Verde’s updated sales volume target is 2,000,000 tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

 

Period FY 2023
 Guidance Original

January 10, 2022

Revised

May 03, 2022

Sales target (tonnes) 1,400,000 2,000,000

 

On April 26, 2022, Verde announced the launch of Bio Revolution, a new technology that enables the incorporation of microorganisms to its Product.[4] Verde is the first company to commercialize a fertilizer with added microorganisms. As part of the Fourth Agricultural Revolution, microorganisms are seen as a vital component in boosting plant productivity. Bio Revolution will reduce costs for farmers by sustainably increasing the productivity and profitability. Given Verde’s first mover advantage, the Company is working to become world leader at offering a cost-efficient platform for adding microorganisms to agriculture.

 

Call with Cristiano Veloso, Founder and CEO

Cristiano Veloso will host a call on Monday, May 09, 2022, at 10:00 am Eastern Time, to discuss Verde in general and, more specifically, the role of the Company’s new Bio Revolution technology to the Fourth Agricultural Revolution. The call will be held on Twitter Spaces. Subscribe and join the Space using the link below:

 

Date: Monday, May 09, 2022
Time: 10:00 am Eastern Time
Subscription link: https://twitter.com/i/spaces/1MYxNnpYoXnxw

 

About Verde AgriTech

Verde is an agricultural technology company that produces potash fertilizers. Our purpose is to improve the health of all people and the planet. Rooting our solutions in nature, we make agriculture healthier, more productive, and profitable.

Verde is a fully integrated company, from the mining and processing its main feedstock from its 100% owned mineral properties, to the Product sales processes, which also includes direct technical advice for farmers, and distribution.

Verde’s focus on research and development has resulted in one patent and eight patents pending. Among its proprietary technologies are Cambridge Tech, 3D Alliance, MicroS Technology, N Keeper, and Bio Revolution.[5] Currently, the Company is fully licensed to produce up to 2.8 million tonnes per year of its multinutrient potassium fertilizers K Forte® and BAKS®, sold internationally as Super Greensand®.[6] By the end of 2022, it plans to become Brazil’s largest potash producer by capacity.[7] Verde has a combined measured and indicated mineral resource of 1.47 billion tonnes at 9.28% K2O and an inferred mineral resource of 1.85 billion tonnes at 8.60% K2O (using a 7.5% K2O cut-off grade).[8] This amounts to 295.70 million tonnes of potash in K2O. For context, in 2021 Brazil’s total consumption of potash in K2O was 7.92 million.[9]

Brazil ranks second in global potash demand and is its single largest importer, currently depending on external sources for over 96% of its potash needs. In 2021, potash accounted for approximately 2% of all Brazilian imports by dollar value.

 

Corporate Presentation

For further information on the Company, please view shareholders’ deck:

https://verde.docsend.com/view/9mryhmxmcqske7yd

 

Investors Newsletter

Subscribe to receive the Company’s updates at:

http://cloud.marketing.verde.ag/InvestorsSubscription

The last edition of the newsletter can be accessed at: https://bit.ly/InvestorsNL-March2022

 

Cautionary Language and Forward-Looking Statements

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. The Cautionary Language and Forward-Looking Statements can be accessed at this link.

 

For additional information please contact:

Cristiano Veloso, Founder, Chairman & Chief Executive Officer

Tel: +55 (31) 3245 0205; Email: investor@verde.ag

www.investor.verde.ag | www.supergreensand.com | www.verde.ag

 

[1] See the release at: https://investor.verde.ag/verde-announces-2022-guidance-and-two-year-outlook/

[2] See the release at: https://investor.verde.ag/verdes-q4-sales-by-volume-grow-137-driving-2021-net-profit-growth-to-540/

[3]  Before non-cash events.

[4] See the release at: https://investor.verde.ag/verde-launches-bio-revolution/

[5] Learn more about our technologies: https://verde.docsend.com/view/yvthnpuv8jx6g4r9

[6] See the release at: https://investor.verde.ag/2-5-million-tonnes-per-year-potash-mining-concession-granted-to-verde/

[7] See the release at: https://investor.verde.ag/verde-to-reach-3-million-tonnes-potash-production-capacity-in-2022/

[8] As per the National Instrument 43-101 Standards of Disclosure for Mineral Projects within Canada (“NI 43 -101”), filed on SEDAR in 2017. See the Pre-Feasibility Study at: https://investor.verde.ag/wp-content/uploads/2021/01/NI-43-101-Pre-Feasibility-Technical-Report-Cerrado-Verde-Project.pdf

[9] Union of the Agricultural Fertilizers and Correctives Industry, in the State of São Paulo (“SIACESP”, from Sindicato da Indústria de Fertilizantes e Corretivos Agropecuários, no Estado de São Paulo).

Verde’s Q4 sales by volume grow 137% driving 2021 net profit growth to 540%

(All figures are in Canadian dollars, unless stated otherwise. Average exchange rate in 2021: C$1.00 = R$4.31)

Belo Horizonte, Brazil. Verde AgriTech Plc (TSX: “NPK”) (OTCQB: “AMHPF”) (“Verde” or the “Company”) is pleased to announce its financial results for the fourth quarter 2021 (“Q4 2021”) and full year ended December 31, 2021 (“FY 2021”).

Q4 2021 Financials

  • Revenue increased by 391% in Q4 2021, to $10,851,000 compared to $2,209,000 in Q4 2020.
  • Revenue in Brazilian Real (“R$”) increased by 450% in Q4 2021, to R$46,723,000 compared to R$8,489,000 in Q4 2020.
  • Sales by volume increased by 137% in Q4 2021, to 134,350 tonnes sold compared to 56,585 tonnes sold in Q4 2020.
  • Gross margin increased to 75% in Q4 2021, compared to 59% in Q4 2020.
  • Operating profit before non-cash events increased by 6786% in Q4 2021, to $2,452,000 compared to $36,000 in Q4 2020.
  • Net profit increased to $1,878,000 in Q4 2021, compared to a net loss $192,000 in Q4 2020.

 

FY 2021 Financials

  • Revenue increased by 202% in FY 2021, to $27,709,000 compared to $9,167,000 in FY 2020.
  • Revenue in R$ increased by 239% in FY 2021, to R$119,310,000, compared to R$35,232,000 in FY 2020.
  • Sales by volume increased by 64% in FY 2021, to 400,133 tonnes sold compared to 243,707 tonnes in FY 2020.
  • Gross margin increased to 74% in FY 2021, compared to 62% in FY 2020.
  • Operating profit before non-cash events increased by 305% in FY 2021, to $6,450,000 compared to $1,591,000 in FY 2020.
  • Net profit increased by 540%, to $3,522,000 in FY 2021 compared to $550,000 in FY

 

Subsequent Events

  • In January 2022, as a result of the Company’s continued accelerated market expansion, Verde announced its Paid for Growth (“P4G”) strategy, a cornerstone program aimed at distributing gains to shareholders. P4G strategy is possible because cashflow is now freed up thanks to Verde’s ability to finance expansion backed by future sales contracts. Previously, financing could only be secured by invoice discounting or guaranteed by capital goods; now, Verde’s future sales contracts are accepted as debt collateral.
  • In February 2022, Verde adopted Earned Growth Rate (“EGR”) as a key metric for market success. EGR measures the sales growth by volume generated by returning customers and new client purchases made by existing clients’ referrals. The Company achieved an EGR of 165% in 2021, compared to a rate of 61% in 2020, demonstrating a higher client repurchase rate and successful client referrals.
  • In February 2022, the Company received a new Mining Concession for the extraction of up to 2,500,000 tonnes per year (“tpy”) of Product. Verde is now fully permitted to produce up to 2,833,000 tpy.
  • In February 2022, Verde AgriTech Plc’s Brazilian subsidiaries, Verde Fertilizantes LTDA and FVS Mineração LTDA, earned ISO 9001 and ISO 14001 certifications.
  • In February 2022, the Company created a Special Committee to evaluate when and how to share profits with shareholders. The Special Committee to conduct the analysis is comprised of independent directors of the Board, consisting of Mr. Michael St Aldwyn (Verde’s Lead Independent Director), Mr. Renato Gomes and Mr. Paulo Sérgio Ribeiro.
  • In February 2022, the Company’s Board of Directors unanimously approved an accelerated investment program to bolster an expansion plan that has two objectives: First, expand Plant 2’s operational capacity from 1,200,000 to 2,400,000 tpy by Q4 2022; and second, upgrade local infrastructure to sustain Plant 2’s logistics with added capacity to enable a future Plant 3. By Q4 2022, with Plant 2’s expansion, Verde expects to have raised its overall production capacity to 3,000,000 tpy. The approved expansion plan investment totals R$ 51 million Brazilian Reais (“R$”), which comes on top of the R$22 million previously approved for the construction of Plant 2. The Company aims to fund the expansion plan through a combination of future cashflow and debt finance backed by future sales contracts.

 

“Thanks to our team and all their efforts in 2021, Verde continued its accelerated growth with improving numbers in every subsequent quarter. We are excited and proud to be part of a team that is second to none when it comes to motivation and competence. We all recognize how fortunate we are to make a living while making a major contribution to the world”, declared Verde’s Founder, President & CEO Cristiano Veloso.

 

2021 Guidance

The Company’s original 2021 revenue guidance was R$50 million, the amount was revised upwards on November 15, 2021, to R$110 million. However, the realized 2021 revenue totalled R$119 million.

 

2022 Guidance

As announced in the press release published on January 10, 2022, the Company’s 2022 target, detailed on a quarterly basis to reflect the market demand’s seasonality, is as follows:

Period Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022
Sales target (tonnes) 115,000 200,000 250,000 135,000 700,000
Revenue ($’000) 10,070 21,954 27,228 13,011 72,263
EBITDA ($’000) 1,358 10,155 13,414 3,506 28,434
EPS ($) 0.02 0.18 0.25 0.06 0.50

 

The 2022 guidance is underpinned by the following assumptions:

  • Average Brazilian Real (“R$”) to Canadian dollar exchange rate: C$1.00 = R$4.40 (in March 18, 2022, the exchange rate closed at C$1.00 = R$3.99).
  • Average KCl CFR Brazil of US$500, compared to current price of US$1,025 per tonne (as per the market intelligence firm Acerto Limited weekly price for March 17, 2022).
  • Sales Incoterms: 50% CIF and 50% FOB.
  • Sales channels: 50% direct sales and 50% indirect sales.

Note that the assumption above does not include the grant of a new mining concession, as originally presented in the January 10, 2022, press release, because in February, 2022, Verde was awarded a Mining Concession for extraction of an additional amount 2,500,000 tpy of Product, bringing Verde’s total permitted mining capacity to 2,833,000 tpy.

“The 2022 Guidance is a noticeable leap from 2021 numbers. We still expect, however, to revise these numbers upwards as the year progresses to reflect both Product demand and increased potash prices, despite Q1 having been one of the wettest ever rainy seasons and the oil price increases,” commented Cristiano Veloso.

 

2023 Guidance

For 2023, Verde’s original sales volume target is 1.4 million tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”) but it is now under review in light of the recent total 2.8 million tonnes permitted production capacity following the permits received in February, 2022, and increased production potential for 2022.

 

2021’s Key Objectives:

On March 31, 2021, Verde announced its key objectives for the year. A review of those objectives is detailed below:

 

Achieve 10% of the Company’s total sales as BAKS®:

BAKS® accounted for 9.8% of the total volume sold in 2021. BAKS® demand outstripped Verde’s production capacity for the period.

 

Launch a new technology in the second quarter of 2021:

On June 02, 2021, the Company launched N Keeper®, a proprietary processing technology for glauconitic siltstone that alters its physical-chemical properties to enable ammonia retention for use as a calibrated additive in Nitrogen fertilizers. This combination is responsible for the reduction of Nitrogen volatilization loss, allowing more agronomic efficiency for farmers and contributing to the reduction of global warming impacts caused by Nitrogen fertilizers manufacturing and application.

 

Get ISO 9001 and ISO 14001 certified:

Verde AgriTech Plc’s Brazilian subsidiaries, Verde Fertilizantes LTDA and FVS Mineração LTDA, were ISO 9001 and ISO 14001 certified in February 2022.

 

Obtain the Mining Concession for 2,500,000 tpy for Mine Pit 2:

Verde received the Mining Concession for extraction of up to 2,500,000 tpy for Mine Pit 2, which will supply raw material for our Plant 2, to boost our production in the coming years. Verde is now fully permitted to produce up to 2,833,000 tpy.

This is one of the milestones towards the target of 25,000,000 tonnes annual production, which represents a NPV per share of $50.94, based on the NI 43-101 Pre-Feasibility Technical Report Cerrado Verde Project filed by the Company on SEDAR in 2017 (“Old Pre-Feasibility),[1] which relied on a KCl price of US$250, instead of US$1,025 per tonne currently negotiated (as per the market intelligence firm Acerto Limited weekly price for March 17, 2022).

 

Initiate the construction of Plant 2, with the completion of the necessary infrastructure for its development, such as the plant’s power grid connection, access routes improvement and preliminary civil construction:

As disclosed in the press release published on November 16, 2020, the construction of Plant 2 was scheduled to begin in the second half of 2021. Groundbreaking took place in August 2021, and Plant 2 is expected to reach commercial production by Q3 2022.

Verde’s Key Objectives for 2022:

  • Reach Plant 2’s commercial production by Q3 2022.
  • Expand Plant 2’s operational capacity from 1,200,000 to 2,400,000 tpy by Q4 2022, raising Verde’s overall production capacity to 3,000,000 tpy.
  • Upgrade local infrastructure to sustain Plant 2’s logistics with added capacity to enable a future Plant 3.
  • Finish the New Pre-Feasibility Study (“PFS”), which is currently under elaboration. In addition to the potash market, the New PFS has the objective to assess sulfur and micronutrients’ potential market in Brazil, based on the technologies MicroS and 3D Alliance developed by the Company. The New PFS will revamp the information disclosed in the Old Pre-Feasibility Study. The New PFS will contemplate a scenario of total annual production of 50,000,000 tonnes of Verde’s Product, equivalent to 63% of the total Brazilian potash consumption in 2021.
  • Launch a new technology in Q2 2022.
  • Reach 100 cities with Cultivando Amor, Verde’s flagship social engagement program that in 2021 raised over R$270,000 for charities across 16 cities in Brazil. The program donates part of Verde’s sales proceeds to charities chosen by the Company’s clients in their municipalities.

Environmental

Verde’s production process is sustainable. The processing does not require tailings dams, nor does it generate any waste by products. In sum, the ore recovery rate is 100%.

The mined area is mainly composed of degraded pasturelands that, once mined, Verde transforms into tropical forest. To that end, the Company planted 4,300 trees in 2019, 5,000 trees in 2020, and 9,888 trees in 2021. All planted species are originally native to the region, many of which are today deemed endangered species.

 

Selected Annual Financial Information

The table below summarizes Q4 and FY 2021 financial results compared to Q4 and FY 2021:

All amounts in CAD $’000 Q4 2021 Q4 2020 FY 2021 FY 2020
Tonnes sold ‘000 134 57 400 244
Revenue per tonne sold $ 81 39 69 38
Production cost per tonne sold $ (20) (16) (18) (14)
Gross Profit per tonne sold $ 61 23 51 23
Gross Margin 75% 59% 74% 62%
   
Revenue 10,851 2,209 27,709 9,167
Production costs (2,691) (912) (7,131) (3,515)
Gross Profit 8,160 1,297 20,578 5,652
Gross Margin 75% 59% 74% 62%
Sales and product delivery freight expenses (4,463) (673) (11,252) (2,270)
General and administrative expenses (1,245) (588) (2,876) (1,791)
Operating Profit before non-cash events 2,452 36 6,450 1,591
Share Based and Bonus Payments (Non-Cash Event) (1) (23) (18) (1,551) (425)
Depreciation and Amortisation (1) (18) (4) (53) (23)
Profit on disposal of plant and equipment (1) 9 (17)
Operating Profit after noncash events 2,411 14 4,855 1,126
Income tax (2) (360) (79) (931) (330)
Interest Income/Expense (173) (127) (402) (246)
Net Profit 1,878 (192) 3,522 550

 

(1) – Included in General and Administrative expenses in financial statements

(2) – Please see Income Tax notes.

 

Q4 and FY 2021 compared with Q4 and FY 2020

 

Q4 2021

The Company generated a net profit of $1,878,000 for Q4 2021, an increase of $2,070,000 compared to a net loss of $192,000 for Q4 2020. The profit per share was $0.037 for Q4 2021, compared to loss per share of $0.003 for Q4 2020.

FY 2021

The Company generated a net profit of $3,522,000 in FY 2021, an increase of 540% compared to a net profit of $550,000 in FY 2021. The increase was due to the continued growth of the Company. The earnings per share was $0.070 for FY 2021, compared to $0.012 for FY 2020.

 

Product Sales

 

Q4 2021

Sales by volume increased by 137% in Q4 2021, to 134,350 tonnes sold compared to 56,585 tonnes sold in Q4 2020.

FY 2021

Sales increased by 64% in FY 2021, to 400,133 tonnes sold, compared to 243,707 tonnes FY 2020, as the Company’s Product continues to grow in the market.

 

Revenue

 

Q4 2021

Revenue from sales increased by 391% in Q4 2021, to $10,851,000 from the sale of 134,350 tonnes of the Product, at $81 per tonne sold; compared to $2,209,000 in Q4 2020 from the sale of 56,585 tonnes of the Product, at $39 per tonne sold.

Revenue per tonne excluding freight expenses (FOB price) improved by 24% in Q4 2021, to $53 compared to $31 in Q4 2020.

The KCl price increased by 165% in Q4 2021, compared to Q4 2020. Verde did not, however, see a proportional increase in its pricing for Q4 2021 sales because it had sold most of its Q4 production earlier in the year.

Despite the 7% Brazilian Real devaluation against the Canadian Dollar, revenue per tonne in Q4 2021 was higher than Q4 2020 mainly due to:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 23% of total sales in Q4 2020 to 63% in Q4 2021.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$315-US$320 per tonne in Q4 2020 to US$760-850 per tonne in Q4 2021 (as reported by Acerto Limited, a market intelligence firm).
  3. BAKS® has a higher sales price per tonne than K Forte®. BAKS® was launched in December 2020 and in Q4 2021 it accounted for 7,2% of the total volume sold by the Company.

 

FY 2021

Revenue from sales increased by 202% in FY 2021, to $27,709,000 from the sale of 400,133 tonnes of the Product, at $69 per tonne sold; compared to $9,167,000 in FY 2020 from the sale of 243,707 tonnes of the Product, at $38 per tonne sold.

Revenue per tonne excluding freight expenses (FOB price) improved by 42% in FY 2021, to $47 compared to $33 in FY 2020.

The KCl price increased by 136% in FY 2021, compared to FY 2020. Verde did not, however, see a proportional average increase in its pricing for FY 2021 sales because it had sold most of its Q4 production earlier in the year.

Despite the 12% Brazilian Real devaluation against the Canadian Dollar, revenue per tonne in FY 2021 was higher than FY 2020 mainly due to:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 13% of total sales in FY 2020 to 52% in FY 2021.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$280-US$360 per tonne in FY 2020 to US$315-850 per tonne in FY 2021 (as reported by Acerto Limited).
  3. BAKS® has a higher sales price per tonne than K Forte®. BAKS® was launched in December 2020 and in FY 2021 it accounted for 9.8% of the total volume sold by the Company.

 

Production costs

Production costs include all direct costs from mining, processing, and the addition of the other nutrients to the Product, such as Sulfur and Boron. They also include the logistics costs from the mine to the factory and related salaries.

 

Q4 2021

Production costs increased by 195% in Q4 2021, to $2,691,000 compared to $912,000 in Q4 2020. This was due to a 135% increase in volume sold, from 57,000 tonnes in Q4 2020 to 134,000 tonnes in Q4 2021, and due to local inflation. Cost per tonne increased by 24% in Q4 2021, to $20 compared to $16 in Q4 2020. This increase was due in large part to higher fuel prices, which increased by 45% in Q4 2021 compared to Q4 2020.

 

FY 2021

Production costs increased by 103% in FY 2021, to $7,131,000 compared to $3,515,000 in FY 2020. This was due to a 64% increase in volume sold, from 244,000 tonnes in FY 2020 to 400,000 tonnes in FY 2021, and due to local inflation. Cost per tonne increased by 24% in FY 2021, to $18 compared to $14 in FY 2020. This increase was due in large part to higher fuel prices, which increased by 37% in FY 2021 compared to FY 2020. The production costs increase are also due to the larger production of BAKS®, which has a higher cost per tonne because its feedstock includes other nutrients that Verde purchases from third parties.

 

Sales Expenses

CAD $’000 3 months ended

Dec 31, 2021

3 months ended

Dec 31, 2020

12 months ended

Dec 31, 2021

12 months ended

Dec 31, 2020

Sales and marketing expenses (578) (179) (1,818) (975)
Fees paid to independent sales agents (203) (16) (464) (162)
Product delivery freight expenses (3,682) (478) (8,970) (1,133)
Total (4,463) (673) (11,252) (2,270)

 

Sales and marketing expenses

Sales and marketing expenses include employees’ salaries, car rentals, travel within Brazil, hotel expenses, customer relationship management (CRM) software licenses, and the promotion of the Product in marketing events.

 

Q4 2021

Expenses increased by 222% in Q4 2021, to $577,000 compared to $179,000 in Q4 2020, mainly due to a further expansion of Verde’s sales and marketing team, with professional headcount increasing from an average of 35 in Q4 2020 to 54 in Q4 2021. This increase is in line with the Company’s accelerated growth strategy.

 

FY 2021

Expenses increased by 86% in FY 2021, with a total of $1,818,000, compared to $975,000 in FY 2020, also mainly due to a further expansion of Verde’s sales and marketing team, with professional headcount increasing from an average of 32 in FY 2020 to 46 in FY 2021. Such as for Q4 2021, this increase is in line with the Company’s accelerated growth strategy.

 

Fees paid to independent sales agents

As part of Verde’s marketing and sales strategy, the Company pays out commissions to its independent sales agents.

 

Q4 2021

Fees paid to sales independent agents increased by 1150% in Q4 2021, to $203,000 compared to $16,000 in Q4 2020, as a direct result of increased sales.

 

FY 2021

Fees paid to sales independent agents increased by 185% in FY 2021, to $464,000 compared to $162,000 in FY 2020, for the same reason as in the quarter.

 

Product delivery freight expenses

 

Q4 2021

Product delivery freight expenses increased by 671% in Q4 2021, to $3,682,000 compared to $478,000 in Q4 2020, as the Company has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 23% of total sales in Q4 2020 to 63% in Q4 2021 and due to higher fuel prices, which increased 45% in Q4 2021 compared to Q4 2020.

 

FY 2021

Expenses increased by 692% in FY 2021, to $8,970,000 compared to $1,133,000 in FY 2020, as the Company has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 13% of total sales in FY 2020 to 52% in FY 2021 and due to higher fuel prices, which increased 37% in FY 2021 compared to FY 2020.

 

General and Administrative Expenses

CAD $’000 3 months ended

Dec 31, 2021

3 months ended

Dec 31, 2020

12 months ended

Dec 31, 2021

12 months ended

Dec 31, 2020

General administrative expenses (612) (494) (1,621) (1,149)
Legal, professional, consultancy and audit costs (516) (75) (915) (520)
IT/Software expenses (103) (23) (307) (98)
Taxes and licenses fees (14) 4 (33) (24)
Total (1,245) (588) (2,876) (1,791)

 

General administrative expenses

These costs include general office expenses, rent, bank fees, insurance, foreign exchange variances and remuneration of executive and administrative staff in Brazil.

 

Q4 2021

Expenses increased by 24% in Q4 2021, to $612,000 compared to $494,000 in Q4 2020, as they include additional administrative employees, with professional headcount increasing from an average of 20 in Q4 2020 to 51 in Q4 2021 to help support the Company’s growth and incentive compensation.

 

FY 2021

Expenses increased by 41% in FY 2021, to $1,621,000 compared to $1,149,000 in FY 2020, as they include additional administrative employees, with professional headcount increasing from an average of 18 in FY 2020 to 43 in FY 2021.

 

Legal, professional, consultancy and audit costs

Legal and professional fees include legal, professional, consultancy fees along with accountancy, audit and regulatory costs. Consultancy fees are consultants employed in Brazil, such as accounting services, patent process, lawyer’s fees and regulatory consultants.

 

Q4 2021

Expenses increased by 584% in Q4 2021, to $516,000 compared to $75,000 in Q4 2020. The increase is largely due to a $347,000 provision in Q4 2021, set aside for a contested claim made by a consultant retained by the Company in 2012. The consultancy services were for an environmental report, the quality of which was disputed by Verde and payments withheld.  A court decision in Q4 2021 was partially favourable to the consultant and requested an adjusted payment, the Company has appealed the decision.

 

FY 2021

Expenses increased by 76% in FY 2021, to $915,000 compared to $520,000 in FY 2020, mainly due to the provision in Q4 2021.

 

IT/Software expenses

IT/Software expenses include software licenses such as Microsoft Office, Customer Relationship Management (CRM) software and enterprise resource planning (ERP).

 

Q4 2021

Expenses increased by 350% in Q4 2021, to $103,000 compared to $23,000 in Q4 2020.

 

FY 2021

Expenses increased by 213% in FY 2021, to $307,000 compared to $98,000 in FY 2020, due to an increase in third party computing services and number of software licenses used by the Company in Brazil.

 

Taxes and licences

Taxes and licence expenses include general taxes, product branding and licence costs.

 

Q4 2021

Expenses increased by 450% in Q4 2021, to $14,000 compared to a credit of $4,000 in Q4 2020. During Q4 2020, an amount of $15,000 was credited to licence costs for reversal expenses which should have been capitalised in Q1 and Q3 2020.

 

FY 2021

Expenses increased by 34% in FY 2021, to $33,000 compared to $24,000 in FY 2020.

 

Share Based and Bonus Payments (Non-Cash Event)

These costs represent the expense associated with stock options granted to employees and directors and non-cash bonuses paid to key management.

 

Q4 2021

Share Based Payments costs increased by 25% in Q4 2021, to $23,000 compared to $18,000 in Q4 2020, as they represent the expense associated with stock options granted to employees as part of the Company’s long-term incentive programme in Q4 2021. These are measured under the Black-Scholes Model.

 

FY 2021

Share Based Payments costs increased by 265% in FY 2021, to $1,551,000 compared to $425,000 in FY 2020.

 

Income tax

Brazilian corporations are subject to income taxes (IRPJ and CSLL) using an ‘Actual Profits’ method (i.e. APM – Lucro Real), which is based on taxable income (i.e. earnings before taxes or EBT), adjusted by certain additions and exclusions as determined by the legislation. The Actual Profit can be calculated annually or quarterly – for the annual calculation, the tax authorities collect anticipations during the year, as the taxpayer is obliged to calculate the income tax monthly.

Subject to certain restrictions (i.e. where gross income does not exceed R$78 million and depending on the activity), Brazilian taxpayers have the option to calculate IRPJ and CSLL using a ‘Assumed Profits’ method (i.e. PPM – Lucro Presumido). Under the PPM, the income is calculated on a quarterly basis on an amount equal to different percentages of gross revenue (i.e. based on the entity’s activities) and adjusted as determined by the prevailing legislation.

The Brazil subsidiaries are currently under ‘Assumed Profits’ method, which is the most efficient method at this time. Under ‘Assumed Profits’ method, it is not possible to utilise prior period losses to reduce income tax. When the Company switches to “Realized Profits” method, these losses can be utilised.

 

Cultivando Amor

Cultivando Amor is an initiative from Verde, in which there is a partner charity institution for each of the project’s member cities. For each hectare in the region that is cultivated with BAKS® or K Forte®, Verde donates part of the sales’ profits to the partner institution of that city. The initiative has the support of the cities’ Rural Union of Farmers (Sindicato Dos Produtores Rurais).

In 2020, Cultivando Amor’s pilot project was conducted in the city of Patrocínio, where the program’s funds contributed to the Cancer Hospital of Patrocínio, a regional reference in cancer treatment.

In 2021, Verde raised over R$270,000 for charities across 16 cities in Brazil.

Cultivando Amor’s goal for 2022 is to magnify its impacts to 100 cities.

 

Q4 and FY 2021 Results Conference Call

The Company will host a conference call on Wednesday, April 06, 2022, at 09:00 am Eastern Time, to discuss Q4 and FY 2021 results and provide an update. Subscribe using the link below and receive the conference details by email.

Date: Wednesday, April 06, 2022
Time: 09:00 am Eastern Time
Subscription link: https://bit.ly/Q4FY_2021_Results_Presentation

The questions can be submitted in advance through the following link up to 48 hours before the conference call: https://bit.ly/VerdeAgriTech-Q4FY2021-questions

The Company’s full year and fourth quarter financial statements and related notes for the period ended December 31, 2021 are available to the public on SEDAR at www.sedar.com and the Company’s website at www.investor.verde.ag/.

 

About Verde AgriTech

Verde is an agricultural technology company that produces fertilizers. Our purpose is to improve the health of all people and the planet. Rooting our solutions in nature, we make agriculture healthier, more productive, and profitable.

 

Corporate Presentation

For further information on the Company, please view shareholders’ deck: https://verde.docsend.com/view/vidm2xesz92yhyht

 

Investors Newsletter

Subscribe to receive the Company’s updates at:

http://cloud.marketing.verde.ag/InvestorsSubscription

The last edition of the newsletter can be accessed at: https://bit.ly/InvestorsNL-February2022

 

Cautionary Language and Forward-Looking Statements

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. The Cautionary Language and Forward-Looking Statements can be accessed at this link.

 

For additional information please contact:

Cristiano Veloso, President, Chairman & Chief Executive Officer

Tel: +55 (31) 3245 0205; Email: investor@verde.ag

www.investor.verde.ag | www.supergreensand.com | www.verde.ag

 

[1] Based on $2.607 billion NPV after tax divided by 50,398,619 shares outstanding as of March 21, 2022. Estimated Net Present Value after tax of US$1.99 billion, with 8% discount rate and Internal Rate of Return of 287% (see NI 43-101 Pre-Feasibility Technical Report Cerrado Verde Project, MG, Brazil, page 207). Currency exchange: US$1.00 = C$1.29.

Verde announces 2022 guidance and two year outlook

Belo Horizonte, Brazil. Verde AgriTech Plc (TSX: “NPK”) (OTCQB: “AMHPF”) (“Verde” or the “Company”) is pleased to announce its 2022 guidance of 700,000 tonnes production, with sales of $72.3 million, EBITDA of $28.4 million, net earnings per share (“EPS”) of $0.50; and a 2023 guidance of 1.4 million tonnes.

 

 2022 Guidance

The Company’s target is detailed on a quarterly basis, reflecting the market demand’s seasonality, as follows:

Period Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022
Sales target (tonnes) 115,000 200,000 250,000 135,000 700,000
Revenue ($’000) 10,070 21,954 27,228 13,011 72,263
EBITDA ($’000) 1,358 10,155 13,414 3,506 28,434
EPS ($) 0.02 0.18 0.25 0.06 0.50

 

The 2022 guidance is underpinned by the following assumptions:

  • Grant of mining concession
  • Average Brazilian Real (“R$”) to Canadian dollar exchange rate: C$1.00 = R$4.40
  • Average KCl CFR Brazil of US$500, compared to current price of US$760 per tonne (as per the market intelligence firm Acerto Limited weekly price as of December 3, 2021).
  • Sales Incoterms: 50% CIF and 50% FOB
  • Sales channels: 50% direct sales and 50% indirect sales

“Over the previous years, seeing that we were producing and selling a new product, our guidance was limited to volume and revenue. From 2022 onwards we are pleased to add EBITDA and EPS to Verde’s guidance”, said Cristiano Veloso, Verde’s Founder and CEO.

 

2023 Guidance

For 2023, Verde’s sales volume target is 1.4 million tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

 

Investors Newsletter

Subscribe to receive the Company’s monthly updates at:

http://cloud.marketing.verde.ag/InvestorsSubscription

The last edition of the newsletter can be accessed at: https://bit.ly/Newsletter-November2021

 

About Verde AgriTech

Verde is an agricultural technology company that develops and produces fertilizers. Rooting our solutions in nature, we make agriculture healthier, more productive, and profitable for farmers. We work to improve the health of all people and the planet.

 

Cautionary Language and Forward-Looking Statements

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements”) within the meaning of the applicable Canadian securities legislation. The Cautionary Language and Forward-Looking Statements can be accessed at this link.

 

For additional information please contact:

Cristiano Veloso, President, Founder & Chief Executive Officer

Tel: +55 (31) 3245 0205; Email: investor@verde.ag

www.investor.verde.ag | www.verde.ag | www.supergreensand.com