(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
- 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.
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$119 million.
As announced in the press release published on January 10, 2022, the Company’s 2022 target, detailed on a quarterly basis to reflect the market demand’s seasonality, is as follows:
|Period||Q1 2022||Q2 2022||Q3 2022||Q4 2022||FY 2022|
|Sales target (tonnes)||115,000||200,000||250,000||135,000||700,000|
The 2022 guidance is underpinned by the following assumptions:
- Average Brazilian Real (“R$”) 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.
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), 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.
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|
|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 non–cash events||2,411||14||4,855||1,126|
|Income tax (2)||(360)||(79)||(931)||(330)|
(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
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.
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.
Sales by volume increased by 137% in Q4 2021, to 134,350 tonnes sold compared to 56,585 tonnes sold in Q4 2020.
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 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:
- Product volume sold as CIF (Cost Insurance and Freight) increased from 23% of total sales in Q4 2020 to 63% in Q4 2021.
- 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).
- 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.
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:
- Product volume sold as CIF (Cost Insurance and Freight) increased from 13% of total sales in FY 2020 to 52% in FY 2021.
- 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).
- 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 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.
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.
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.
|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)|
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 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.
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.
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.
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
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.
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)|
|Taxes and licenses fees||(14)||4||(33)||(24)|
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 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.
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.
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.
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 include software licenses such as Microsoft Office, Customer Relationship Management (CRM) software and enterprise resource planning (ERP).
Expenses increased by 350% in Q4 2021, to $103,000 compared to $23,000 in Q4 2020.
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.
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.
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.
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.
Share Based Payments costs increased by 265% in FY 2021, to $1,551,000 compared to $425,000 in FY 2020.
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 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|
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.
For further information on the Company, please view shareholders’ deck: https://verde.docsend.com/view/vidm2xesz92yhyht
Subscribe to receive the Company’s updates at:
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: email@example.com
 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.