Verde’s revenue grows by 156% in Q3 2022, with a 123% increase in EBITDA

Singapore. Verde AgriTech Ltd (TSX: “NPK”) (“OTCMKTS: “VNPKF“) (“Verde” or the “Company”) is pleased to announce its financial results for the third quarter of 2022 (“Q3 2022”).

 

Q3 2022 Financials

  • Revenue increased by 156% in Q3 2022, to $27,269,000 compared to $10,651 in Q3 2021.
  • Revenue in Brazilian Real (“R$”) increased by 140% in Q3 2022, to R$109,056,000 compared to R$45,409,000 in Q3 2021.
  • Sales of Verde’s multinutrient potassium products, BAKS® and K Forte® sold internationally as Super Greensand® (the “Product”) by volume increased by 23% in Q3 2022, to 189,548 tonnes, compared to 153,674 tonnes sold in Q3 2021.
  • Gross margin increased to 78% in Q3 2022, compared to 77% in Q3 2021.
  • EBITDA before non-cash events increased by 123% in Q3 2022 to $8,177,000, compared to $3,665,000 in Q3 2021.
  • Net profit increased by 103% in Q3 2022, to $6,458,000 compared to $3,182,000 in Q3 2021.

 

Subsequent Events

  • In October 2022, the Company announced that its second production plant (“Plant 2”) achieved its nameplate production capacity of 1.2 million tonnes per year (“Mtpy”) of Product. Plant 2 was commissioned on August 31, 2022. In parallel, Plant 2 was undergoing an expansion process to be capable of producing 2.4Mtpy. Verde’s Plant 1 operates at a capacity of 0.6Mtpy; therefore, Verde’s overall production capacity is expected to be 3Mtpy once Plant 2 achieves its nameplate capacity of 2.4Mtpy, after its ramp up is concluded.
  • In October 2022, Verde secured a C$5.01 million (R$20 million) loan from Banco do Brasil, in line with the financing strategy for Plant 2’s capex. The loan term is 48 months at CDI (based on SELIC, the Brazilian Central Bank overnight interest rate) + 3.70% per annum, preceded by a 12-month grace period.
  • In November 2022, Verde announced that the expansion of Plant 2 was complete, with production now being ramped up from 1.2 Mtpy to 2.4 Mtpy of Verde’s Product.

 

“The growth experienced throughout Q3 2022 reflects yet again the market’s growing demand for our Product. With Plant 2’s commissioning, we expect Verde to continue its growth trajectory and improving bottom-line. It was a pity that we could not fulfil all the orders placed in our books, having had to turn down so many orders because of the operational constraints then present, yet I applaud our team for their efforts and dedication during this quarter,” declared Verde’s Founder, President & CEO, Cristiano Veloso.

 

2022 Guidance

Verde achieved is EPS, EBITDA, revenue and sales guidance for Q3 2022. The table below compares the Company’s 2022 to 2021 results.

Period Year EPS (C$) EBITDA[1] (C$’000) Revenue (C$’000) Sales (tonnes)
Q1 2021 -0.04 -887 831 16,558
2022 0.06 3,678 11,304 111,667
% Δ N/A N/A 1260% 574%
Q2 2021 0.01 1,220 5,376 96,233
2022 0.19 10,765 24,861 202,255
% Δ 3700% 782% 362% 110%
Q3 2021 0.06 3,665 10,651 153,674
2022 0.12 8,177 27,269 189,548
% Δ 117% 123% 156% 23%
Q4 2021 0.04 2,452 10,851 134,350
2022
% Δ
FY 2021 0.07 6,450 27,709 400,133
2022
% Δ

 

 

Selected Annual Financial Information

The table below summarizes Q3 2022 financial results compared to Q3 2021, and provides information about 2022 and 2021 year-to-date (“YTD”):

All amounts in CAD $’000 Q3 2022 Q3 2021 YTD 2022 YTD 2021
Tonnes sold ‘000 189 154 503 266
Revenue per tonne sold $ 144 69 126 63
Production cost per tonne sold $ (32) (16) (28) (17)
Gross Profit per tonne sold $ 112 52 98 47
Gross Margin 78% 77% 78% 74%
 
Revenue 27,269 10,651 63,434 16,858
Production costs (6,069) (2,452) (14,055) (4,440)
Gross Profit 21,200 8,199 49,379 12,418
Gross Margin 78% 77% 78% 74%
Sales and product delivery freight expenses (11,053) (4,022) (23,095) (6,789)
General and administrative expenses (1,970) (512) (3,666) (1,631)
EBITDA (1) 8,177 3,665 22,618 3,998
Share Based and Bonus Payments (Non-Cash Event) (2) (20) (14) (124) (1,528)
Depreciation and Amortisation (2) (84) (19) (148) (35)
Profit on disposal of plant and equipment (2) 9
Operating Profit after non-cash events 8,073 3,632 22,346 2,444
Interest Income/Expense (722) (98) (1,152) (229)
Net Profit before tax 7,351 3,534 21,194 2,215
Income tax (3) (893) (352) (2,079) (571)
Net Profit 6,458 3,182 19,115 1,644

(1) – Non GAAP measure
(2) – Included in General and Administrative expenses in financial statements
(3) – Please see Income Tax notes

 

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 spot CIF (Minas Gerais) prices. The table below summarizes these changes:

% Δ Q3 2022 Q3 2021
Canadian Dollar (C$) Average Exchange Rate -6% R$3.99 R$4.26
Potassium Chloride CIF (Minas Gerais) Lowest Price(1) +27% US$ 655 US$ 515
Potassium Chloride CIF (Minas Gerais) Highest Price(1) +36% US$ 1,050 US$ 772

 

(1) – Source: Acerto Limited Report.

 

Net Profits and EPS

The Company generated a net profit of 6,458,000 for Q3 2022, an increase of $3,275,000 compared to $3,182,000 for Q3 2021. The basic earnings per share was $0.12 for Q3 2022, compared to $0.06 for Q3 2021.

 

Product Sales

Sales by volume increased by 23% in Q3 2022, to 189,548 tonnes sold compared to 153,674 tonnes sold in Q3 2021.

 

Revenue

Revenue from sales increased by 156% in Q3 2022, to $27,269,000 from the sale of 189,548 tonnes of the Product, at $144 per tonne sold; compared to $10,651,000 in Q3 2021 from the sale of 153,674 tonnes of the Product, at $69 per tonne sold.

Revenue per tonne excluding freight expenses (FOB price) improved by 98% in Q3 2022, to $95 compared to $48 in Q3 2021.

Revenue per tonne in Q3 2022 was higher than Q3 2021 mainly due to:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 50% of total sales in Q3 2021 to 78% in Q3 2022.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$515-772 per tonne in Q3 2021 to US$655-1,050 per tonne in Q3 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. Production costs also include the logistics costs from the mine to the plant and related salaries.

Production costs increased by 147% in Q3 2022, to $6,068,000 compared to $2,452,000 in Q3 2021. This was due to a 23% increase in volume sold, from 153,674 tonnes in Q3 2021 to 189,548 tonnes in Q3 2022.

Cost per tonne increased by 101% in Q3 2022, to $32 compared to $16 in Q3 2021. This increase was mainly driven by a 60% increase in diesel price. Furthermore, there was an increase in Product sales in big bags that have a higher cost per tonne compared to bulk sales; big bags made up 27% of the total sales in Q3 2022 compared to 20% Q3 2021. Finally, Brazil’s inflation over the twelve month period is over 11%.

 

Sales Expenses

CAD $’000 Q3 2022 Q3 2021 YTD 2022 YTD 2021
Sales and marketing expenses (1,385) (600) (2,919) (1,241)
Fees paid to independent sales agents (481) (189) (976) (260)
Product delivery freight expenses (9,187) (3,233) (19,200) (5,288)
Total (11,053) (4,022) (23,095) (6,789)

 

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 131% in Q3 2022, to $1,385,000 compared to $600,000 in Q3 2021, mainly due to an expansion of Verde’s sales and marketing team, with professional headcount in the team increasing from an average of 57 in Q3 2021 to 70 in Q3 2022, and due to additional investments in media as a strategy to attract new customers. 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 155% in Q3 2022, to $481,000 compared to $189,000 in Q3 2021, due to sales price and volume increase.

 

Product delivery freight expenses

Product delivery freight expenses increased by 184% in Q3 2022, to $9,187,000 compared to $3,233,000 in Q3 2021, as the Company has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 50% of total sales in Q3 2021 to 78% in Q3 2022, and due to higher fuel prices, which increased by 60% in Q3 2022 compared to Q3 2021.

 

General and Administrative Expenses

CAD $’000 Q3 2022 Q3 2021 YTD 2022 YTD 2021
General administrative expenses (1,096) (291) (1,895) (1,009)
Legal, professional, consultancy and audit costs (667) (134) (1,155) (399)
IT/Software expenses (180) (82) (570) (204)
Taxes and licenses fees (27) (5) (46) (19)
Total (1,970) (512) (3,666) (1,631)

 

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 increased by 276% in Q3 2022, to $1,096,000 compared to $291,000 in Q3 2021 mainly due to an accrual of $450,000 in management bonuses that was set aside in Q3. In addition, there was increased salary costs due to additional administrative employees hired to help support the Company’s growth, with professional headcount increasing from an average of 56 in Q3 2021 to 115 in Q3 2022.

 

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 398% in Q3 2022, to $667,000 compared to $134,000 in Q3 2021. This was mainly due to additional relocation expenses associated with the redomicile of the Company to Singapore. There was also increased legal and consultancy costs in the quarter.

 

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 118% in Q3 2022, to $180,000 compared to $82,000 in Q3 2021, 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 Q3 2022, to $27,000 compared to $5,000 in Q3 2021.

 

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 increased by 41% in Q3 2022, to $20,000 compared to $14,000 in Q3 2021.

 

Q3 2022 Results Conference Call

The Company will host a conference call on Thursday, November 17, 2022, at 10:00 a.m. Eastern Time, to discuss the Q3 2022 results and provide an update. Subscribe using the link below and receive the conference details by email.

Date: Thursday, November 17, 2022
Time: 10:00 a.m. Eastern Time
Subscription link: https://bit.ly/Q32022_ResultsPresentation

 

The questions can be submitted in advance through the following link up to 48 hours before the conference call: https://bit.ly/Q3_2022_ResultsPresentation_Questions

 

The Company’s first quarter financial statements and related notes for the period ended September, 2022 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.[2] 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®.[3]

By the end of 2022, Verde aims to become Brazil’s largest potash producer by capacity.[4] 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).[5] 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.[6]

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/w9zdpq9istxftz9s

 

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/InvestorNewsletter_October2022

 

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] Before non-cash events.

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

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

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

[5] 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

[6] 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 achieves 782% EBITDA and 362% revenue growths in Q2 2022

Belo Horizonte, Brazil. Verde AgriTech Ltd (TSX: “NPK”) (“Verde” or the “Company”) is pleased to announce its financial results for the second quarter of 2022 (“Q2 2022”).

 

Q2 2022 Financials

  • Revenue increased by 362% in Q2 2022, to $24,861,000 compared to $5,376,000 in Q2 2021.
  • Revenue in Brazilian Real (“R$”) increased by 327% in Q2 2022, to R$99,185,000 compared to R$23,215,000 in Q2 2021.
  • Sales of Verde’s multinutrient potassium products, BAKS® and K Forte® sold internationally as Super Greensand® (the “Product”) by volume increased by 112% in Q2 2022, to 202,255 tonnes, compared to 95,551 tonnes sold in Q2 2021.
  • Gross margin increased to 79% in Q2 2022, compared to 72% in Q2 2021.
  • EBITDA before non-cash events increased by 782% in Q2 2022 to $10,765,000, compared to $1,220,000 in Q2 2021.
  • Net profit increased by 3426% in Q2 2022, to $9,625,000 compared to $273,000 in Q2 2021.

 

Subsequent Events

  • In July 2022 the Company concluded its re-domiciliation to Singapore, pursuant to which the new Singaporean company, Verde AgriTech Ltd, became the holding company of de UK company Verde AgriTech Plc. Verde’s trading symbols did not change, continuing as “NPK” on the TSX.[1]

“Verde’s growth over Q2 2022 was underpinned by increased productivity and the market’s growing demand for our Product. I would like to congratulate our team for their efforts and contributions during this period. We trust that our expanding production and market presence will lead us to meet our goals for the year and continue to create sustainable long-term value for Verde’s stakeholders,” declared Verde’s Founder, President & CEO, Cristiano Veloso.

 

Plant 2 Update

Plant 2 is expected to be commissioned in August 2022, revving up to an initial production capacity of 1.2 million tonnes per year (“tpy”).[2] Plant 2’s full capacity of 2,400,000 tpy is expected to be reached in early Q4 2022, four times Verde’s Plant 1 current production capacity of 600,000 tpy.

 

2022 Guidance

On May 03, 2022, Verde announced an increase in its 2022 and 2023 guidance,[3] as initially published on January 10, 2022.[4] The Group’s targets are detailed on a quarterly basis, to reflect the market demand’s seasonality, with the original and revised 2022 detailed below:

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 Achieved in Q2 2022 Original Jan 2022 Revised May 2022 Original Jan 2022 Revised May 2022 Original Jan 2022 Revised May 2022
EPS (C$) 0.02 0.06 0.18 0.21 0.19 0.25 0.35 0.06 0.25 0.50 0.87
EBITDA (C$’000)[5] 1,358 3,678 10,155 11,808 10,765 13,414 19,259 3,506 14,319 28,434 49,065
Revenue (C$’000) 10,070 11,304 21,954 22,902 24,861 27,228 40,121 13,011 34,769 72,263 109,097
Sales target (tonnes) 115,000 111,667 200,000 200,000 202,255 250,000 353,718 135,000 334,615 700,000 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

 

The revised guidance already contemplated a 55% increase in diesel prices. However, during Q2 2022, the real average diesel price increased by an additional 23%, for a total of 78% year-on-year increase. This negatively impacted Verde’s EBITDA and EPS as compared to the revised guidance. Q2 2022 revenue and sales were, however, higher than expected for the period. For Q3 and Q4 2022, the Company expects it will meet the overall revised guidance for the year.

 

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 Q2 2022 financial results compared to Q2 2021, and provides information about 2022 and 2021 year-to-date (“YTD”):

 

All amounts in CAD $’000 Q2 2022 Q2 2021 YTD 2022 YTD 2021
Tonnes sold ‘000 202 96 314 113
Revenue per tonne sold $ 123 56 115 55
Production cost per tonne sold $ (26) (16) (25) (18)
Gross Profit per tonne sold $ 97 40 90 37
Gross Margin 79% 72% 78% 68%
 
Revenue 24,861 5,376 36,165 6,207
Production costs (5,332) (1,498) (7,987) (1,988)
Gross Profit 19,529 3,878 28,178 4,219
Gross Margin 79% 72% 78% 68%
Sales and product delivery freight expenses (8,110) (2,236) (12,041) (2,767)
General and administrative expenses (655) (422) (1,696) (1,119)
EBITDA (1) 10,765 1,220 14,441 333
Share Based and Bonus Payments (Non-Cash Event) (2) (40) (693) (104) (1,514)
Depreciation and Amortisation (2) (38) (10) (64) (16)
Profit on disposal of plant and equipment (2) 9
Operating Profit / (loss) after non-cash events 10,686 (517) 14,273 (1,188)
Interest Income/Expense (245) (56) (430) (131)
Net Profit / (Loss) before tax 10,441 (461) 13,843 (1,319)
Income tax (3) (816) (188) (1,186) (219)
Net Profit / (Loss) 9,625 273 12,657 (1,538)

(1) – Non GAAP measure

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

(3) – Please see Income Tax notes

 

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 spot CIF (Minas Gerais) prices.

The table below summaries these changes:

 

Change % 6 months ended Jun 30, 2022 6 months ended Jun 30, 2021
Canadian Dollar (C$) Average Exchange Rate -8% R$3.99 R$4.32
Potassium Chloride CIF (Minas Gerais) Lowest Price(1) +167% US$1,040 US$390
Potassium Chloride CIF (Minas Gerais) Highest Price(1) +129% US$1,270 US$555

(1) – Source: Acerto Limited Report.

Net Profits and EPS

The Group generated a net profit of $9,625,000 for Q2 2022, an increase of $9,352,000 compared to $273,000 for Q2 2021. The basic earnings per share was $0.189 for Q2 2022, compared to $0.005 for Q2 2021.

 

Product Sales

Sales by volume increased by 112% in Q2 2022, to 202,255 tonnes sold compared to 95,551 tonnes sold in Q2 2021.

 

Revenue

Revenue from sales increased by 362% in Q2 2022, to $24,861,000 from the sale of 202,255 tonnes of the Product, at $123 per tonne sold; compared to $5,376,000 in Q2 2021 from the sale of 95,551 tonnes of the Product, at $56 per tonne sold.

Revenue per tonne excluding freight expenses (FOB price) improved by 137% in Q2 2022, to $88 compared to $37 in Q2 2021.

Revenue per tonne in Q2 2022 was higher than Q2 2021 mainly due to:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 43% of total sales in Q2 2021 to 68% in Q2 2022.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$390-555 per tonne in Q2 2021 to US$1,040-1,270 per tonne in Q2 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. Production costs also include the logistics costs from the mine to the plant and related salaries.

Production costs increased by 256% in Q2 2022, to $5,332,000 compared to $1,498,000 in Q2 2021. This was due to a 112% increase in volume sold, from 95,551 tonnes in Q2 2021 to 202,255 tonnes in Q2 2022. Cost per tonne increased by 68% in Q2 2022, to $26 compared to $16 in Q2 2021. This increase was mainly driven by a 78% increase in the diesel price for the period and the increase of Product sold in big bags, rather than bulk, which has a higher per tonne cost.

 

Sales Expenses

CAD $’000 3 months ended Jun 30, 2022 3 months ended Jun 30, 2021 6 months ended Jun 30, 2022 6 months ended Jun 30, 2021
Sales and marketing expenses (711) (347) (1,533) (641)
Fees paid to independent sales agents (359) (63) (495) (71)
Product delivery freight expenses (7,040) (1,826) (10,013) (2,055)
Total (8,110) (2,236) (12,041) (2,767)

 

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 104% in Q2 2022, to $711,000 compared to $348,000 in Q2 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 50 in Q2 2021 to 70 in Q2 2022, and due to additional investments in media as a strategy to attract new customers This increase is in line with the Group’s accelerated growth strategy.

 

Fees paid to independent sales agents

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

Fees paid to independent sales agents increased by 474% in Q2 2022, to $359,000 compared to $63,000 in Q2 2021, due to sales price and volume increase.

Product delivery freight expenses

Product delivery freight expenses increased by 286% in Q2 2022, to $7,040,000 compared to $1,826,000 in Q2 2021, as the Group has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 43% of total sales in Q2 2022 to 68% Q2 2022, and due higher fuel prices, which increased 78% in Q2 2022 compared to Q2 2021.

 

General and Administrative Expenses

CAD $’000 3 months ended Jun 30, 2022 3 months ended Jun 30, 2021 6 months ended Jun 30, 2022 6 months ended Jun 30, 2021
General administrative expenses (389) (240) (799) (718)
Legal, professional, consultancy and audit costs (77) (106) (488) (265)
IT/Software expenses (185) (70) (390) (122)
Taxes and licenses fees (4) (6) (19) (14)
Total (655) (422) (1,696) (1,119)

 

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 increased by 62% in Q2 2022, to $389,000 compared to $240,000 in Q2 2021 mainly due to increased salary costs as they include additional administrative employees, with professional headcount in the team increasing from an average of 47 in Q2 2021 to 128 in Q2 2022 to help support the Group’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 decreased by 28% in Q2 2022, to $77,000 compared to $106,000 in Q2 2021, due to lower 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 166% in Q2 2022, to $185,000 compared to $70,000 in Q2 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 decreased in Q2 2022, to $4,000 compared to $6,000 in Q2 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 94% in Q2 2022, to $40,000 compared to $693,000 in Q2 2021.

 

Q2 2022 Results Conference Call

The Company will host a conference call on Tuesday, August 16, 2022, at 11:00 am Eastern Time, to discuss Q2 2022 results and provide an update. Subscribe using the link below and receive the conference details by email.

 

Date: Tuesday, August 16, 2022
Time: 11:00 am Eastern Time
Subscription link: https://bit.ly/Q2-2022_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-Q2_2022-questions

The Company’s first quarter financial statements and related notes for the period ended June 30, 2022 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.[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, Verde aims 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/5ci6p9mqv6dfbgmf

 

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-June2022

 

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 the press release at: https://investor.verde.ag/verde-announces-completion-of-redomiciliation-process-to-singapore/

[2] as announced by the Company in the press release published on March 03, 2022. See the release at: https://investor.verde.ag/verde-to-reach-3-million-tonnes-potash-production-capacity-in-2022/

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

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

[5] Before non-cash events.

[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 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 169% increase in revenue in Q3 2021 and revises upwards its target for the year

(All figures are in Canadian dollars, unless stated otherwise. Average exchange rate in Q3 2021: C$1.00 = R$4.26)

Belo Horizonte, Brazil. Verde AgriTech Plc (TSX: “NPK”) (OTCQB: “AMHPF”) (“Verde” or the “Company”) is pleased to announce its financial results for the third quarter, ended on September 30, 2021 (“Q3 2021”).

 

Q3 2021 Financials

  • Revenue increased by 169%, to $10,651,000 compared to $3,956,000 in the third quarter of 2020 (“Q3 2020”).
  • Revenue in Brazilian Real (“R$”) increased by 206%, to R$45,409,000 compared to R$14,815,000 in Q3 2020.
  • Gross margin increased to 77% in Q3 2021, compared to 67% in Q3 2020.
  • Operating profit before non-cash events increased by 124%, to $3,665,000 compared to $1,635,000 in Q3 2020.
  • Trade and other receivables increased by 141%, to $8,238,000 compared to $3,415,000 in Q3 2020.
  • Sales by volume increased by 45%, to 153,674 tonnes sold compared to 105,769 tonnes sold in Q3 2020.
  • Net profit increased by 192% in Q3 2021, to $3,183,000, compared to $1,090,000 in Q3 2020.

“Our hard work over the years is yielding consistent growth since production started in 2017. In Q3 2021 the effort was relentless as we sought to meet our heightened target, which was achieved thanks to the high quality and commitment of our team. We will endeavour to maintain an exponential growth expansion for the foreseeable future”, said Cristiano Veloso, Verde’s Founder and CEO.

 

Subsequent Events

  • In October 2021, the Company has secured $3.75 million (R$16 million) in loan agreements to fully cover the capital expenditure for the construction of Plant 2. The first $1.17 million (R$5 million) was released to the Company by Santander. The remaining $2.58 million (R$11 million) was approved in the same month by Santander and Bradesco, to be drawn down according to the project requirements. The total construction cost of Plant 2 is expected to be $5.16 million (R$22 million) with $1.41 million (R$6 million) invested through internally generated cashflow.

“From September onwards, market demand has outstripped Plant 1’s operational capacity. Therefore, after having invested over C$66 million to reach our current rate of production, we are proud to finance the tripling of current capacity based on debt and cashflow alone. Many shareholders have continuously supported Verde over the years – it is therefore gratifying to reciprocate by growing through a shareholder-friendly dilution-free strategy”, declared Mr. Veloso.

 

2021 Guidance

The Company is pleased to announce another increase in its 2021 guidance. The new target is set at R$110 million of revenue for 2021, which would represent an increase of 120% to the Company’s original guidance of R$50 million. If achieved, this new target will represent a 212% growth Year-on-Year (“YoY”).

 

Selected Annual Financial Information

The table below summarizes Q3 2021 financial results compared to Q3 2020 and provides information about 2021 and 2020 year-to-date (“YTD”). All amounts in CAD $’000.

CAD $’000 Q3 2021 Q3 2020 YTD 2021 YTD 2020
Tonnes sold ‘000 154 106 266 187
Revenue per tonne sold $ 69 37 63 37
Production cost per tonne sold $ (16) (12) (17) (14)
Gross Profit per tonne sold $ 53 25 47 23
Gross Margin 77% 67% 74% 63%
   
Revenue 10,651 3,956 16,858 6,957
Production costs (2,452) (1,316) (4,440) (2,602)
Gross Profit 8,199 2,640 12,418 4,355
Gross Margin 77% 67% 74% 63%
Sales and product delivery freight expenses (4,022) (570) (6,789) (1,596)
General and administrative expenses (512) (435) (1,631) (1,203)
Operating Profit before non-cash events 3,665 1,635 3,998 1,556
Share Based and Bonus Payments (Non-Cash Event) (1) (13) (339) (1,528) (407)
Depreciation and Amortisation (20) (3) (35) (18)
Profit on disposal of plant and equipment (18) 9 (18)
Operating Profit after noncash events 3,632 1,275 2,444 1,113
Income tax (352) (136) (571) (252)
Interest Income/Expense (98) (49) (229) (119)
Net Profit 3,182 1,090 1,644 742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Q3 2021 compared with Q3 2020

For Q3 2021 the Company generated a net profit of $3,182,000, an increase of $2,093,000 compared to Q3 2020. The earnings per share was $0.06, compared to $0.02 for Q3 2020.

Product Sales

In Q3 2021, the Company sold 153,674 tonnes, an increase of 45% in comparison to Q3 2020. BAKS® accounted for approximately 10% of Verde’s sales in Q3 2021.

 

Revenue

Revenue from sales for Q3 2021 was $10,651,000 from the sale of 153,674 tonnes of the Product, at $69 per tonne sold. Despite the 14% Brazilian Real devaluation against the Canadian Dollar, revenue per tonne was higher than Q3 2020 ($37 per tonne sold) mainly due to three factors:

  1. Product volume sold as CIF (Cost Insurance and Freight) increased from 14% of total sales in Q3 2020 to 50% in Q3 2021.
  2. Potassium Chloride CIF (Minas Gerais) price increased from US$290-US$310 per tonne in Q3 2020 to US$515-790 per tonne in Q3 2021 (as reported by Acerto Limited, a market intelligence firm).
  3. BAKS has a higher sales price per tonne than the Product, it was launched in Q4 2020 and in Q3 2021 it accounted for 10.5% of the total volume sold.

 

Production costs

Production costs in R$ include all direct costs from mining, processing, and the addition of the other nutrients such as Sulfur and Boron, the logistics from the mine to the factory and related salaries. Production costs for Q3 2021 were $2,452,000, an increase of $1,136,000 compared to Q3 2020. Cost per tonne for the quarter was $16 compared to $12 for the same period in 2020. This increase was due in large part to higher fuel prices, which increased 80% in Q3 2021 compared to Q3 2020, and due to the 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 Q3 2021 Q3 2020 YTD 2021 YTD 2020
Sales and marketing expenses (601) (294) (1,241) (796)
Fees paid to independent sales agents (188) (12) (260) (145)
Product delivery freight expenses (3,233) (264) (5,288) (655)
Total (4,022) (570) (6,789) (1,596)

 

 

 

 

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 $483,000 in Q3 2021 compared to Q3 2020 mainly due to a further expansion of Verde’s sales and marketing team, with professional headcount increasing from 32 in Q3 2020 to 57 in Q3 2021. This increase is in line with the Company’s accelerated growth strategy. The Company’s sales and marketing team had 50 employees in Q2 2021.

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 sales independent agents increased by $176,000 in Q3 2021 compared to Q3 2020. This was mainly due to an overestimated provision of $80,000 for Q1 and Q2 2020, which left a surplus that was therefore deducted from the Q3 2020 costs. Taking into account the surplus, the expenses increased by $96,000 for Q3 2021, due to increased sales success.

 

Product delivery freight expenses

Product delivery freight expenses were $2,969,000 higher in Q3 2021 compared to Q3 2020 as the Company has significantly increased the volume sold as CIF (Cost Insurance and Freight), up from 14% of total sales in 2020 to 50% in 2021 and due to higher fuel prices, which increased 80% in Q32021 compared to Q3 2020.

 

General and Administrative Expenses

CAD $’000 Q3 2021 Q3 2020 YTD 2021 YTD 2020
General administrative expenses (291) (240) (1,009) (656)
Legal, professional, consultancy and audit costs (134) (160) (399) (444)
IT/Software expenses (82) (26) (204) (75)
Taxes and licenses fees (5) (9) (19) (28)
Total (512) (435) (1,631) (1,203)

 

 

 

 

 

 

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. The costs have increased by $51,000 in Q3 2021 compared to Q3 2020 as they include an additional 36 administrative employees, with professional headcount increasing from 20 in Q3 2020 to 56 in Q3 2021 to support the Company’s growth and due to incentive compensation. The Company had 47 administrative employees in Q2 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. The costs in Q3 2021 are $26,000 lower than Q3 2020 mainly due to audit cost reduction and Brazilian Real devaluation against Canadian dollar.

 

IT/Software expenses

IT/Software expenses include software licenses such as Microsoft Office, CRM and enterprise resource planning (ERP). In Q3 2021 expenses were $82,000, an increase of $56,000 on Q3 2020 due to an increase in the number of software licenses used by the Company.

 

Taxes and licences

Taxes and licence expenses include general taxes, product branding and licence costs. In Q3 2021, expenses were $5,000 compared to $9,000 in Q3 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.

Share Based Payments costs in Q3 2021 represent the expense associated with stock options granted to employees as part of the Company’s long-term incentive programme. These are measured under the Black-Scholes Model.

 

Q3 2021 Results Conference Call

The Company will host a conference call on Wednesday, November 24, 2021 at 09:00 am Eastern Time, to discuss Q3 2021 results and provide an update. Subscribe using the link below and receive the conference details by email.

Date: Wednesday, November 24, 2021
Time: 09:00 am Eastern Time
Subscription link: https://bit.ly/Q3-2021_ResultsPresentation

 

 

 

The questions can be submitted in advance through the following link: https://bit.ly/Q3-2021-QuestionForm

The Company’s first quarter financial statements and related notes for the period September 30, 2021
are available to the public on SEDAR at www.sedar.com and the Company’s website at www.investor.verde.ag/.

 

Investors Newsletter

Subscribe to receive the Company’s monthly updates at:

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

The most recent edition of the newsletter can be accessed at: https://bit.ly/InvestorNL-October2021

 

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 & Chief Executive Officer

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

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