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 $273,000 in Q2 2021.
SUBSEQUENT EVENTS
- In July 2022 the Company concluded its re-domiciliation to
Singapore, pursuant to which the new Singaporean company, Verde
AgriTech Ltd, became the holding company of de UK company Verde
AgriTech Plc. Verde’s trading symbols did not change, continuing as
“NPK” on the TSX.1
______________________1 See the press release at:
https://investor.verde.ag/verde-announces-completion-of-redomiciliation-process-to-singapore/
“Verde's growth over Q2 2022 was underpinned by
increased productivity and the market's growing demand for our
Product. I would like to congratulate our team for their efforts
and contributions during this period. We trust that our expanding
production and market presence will lead us to meet our goals for
the year and continue to create sustainable long-term value for
Verde's stakeholders,” declared Verde’s Founder, President &
CEO, Cristiano Veloso.
PLANT 2 UPDATE
Plant 2 is expected to be commissioned in August
2022, revving up to an initial production capacity of 1.2 million
tonnes per year (“tpy”).2 Plant 2's full capacity
of 2,400,000 tpy is expected to be reached in early Q4 2022, four
times Verde’s Plant 1 current production capacity of 600,000
tpy.
2022 GUIDANCE
On May 03, 2022, Verde announced an increase in
its 2022 and 2023 guidance,3 as initially published on January 10,
2022.4 The Group’s targets are detailed on a quarterly basis, to
reflect the market demand's seasonality, with the original and
revised 2022 detailed below:
|
Period |
Q1 2022 |
Q2 2022 |
Q3 2022 |
Q4 2022 |
FY 2022 |
|
Guidance |
OriginalJan 2022 |
Achievedin Q1 2022 |
OriginalJan 2022 |
RevisedMay 2022 |
Achievedin Q2 2022 |
OriginalJan 2022 |
RevisedMay 2022 |
OriginalJan 2022 |
RevisedMay 2022 |
OriginalJan 2022 |
RevisedMay 2022 |
|
EPS (C$) |
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 |
______________________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.
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:
- Product volume sold as CIF (Cost Insurance and Freight)
increased from 43% of total sales in Q2 2021 to 68% in Q2
2022.
- 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
Wednesday, 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: |
Wednesday, 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.
______________________6 Learn more about our
technologies: https://verde.docsend.com/view/yvthnpuv8jx6g4r97 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.pdf10
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).
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:
|
(i) |
the estimated amount and grade of Mineral Resources and Mineral
Reserves; |
| (ii) |
the PFS representing a viable
development option for the Project; |
| (iii) |
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; |
| (iv) |
the estimated amount of future
production, both produced and sold; |
| (v) |
timing of disclosure for the PFS
and recommendations from the Special Committee; |
| (vi) |
the Company’s competitive
position in Brazil and demand for potash; and, |
| (vii) |
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:
|
(i) |
the presence of and continuity of resources and reserves at the
Project at estimated grades; |
| (ii) |
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; |
| (iii) |
the capacities and durability of
various machinery and equipment; |
| (iv) |
the availability of personnel,
machinery and equipment at estimated prices and within the
estimated delivery times; |
| (v) |
currency exchange rates; |
| (vi) |
Super Greensand® and K Forte®
sales prices, market size and exchange rate assumed; |
| (vii) |
appropriate discount rates
applied to the cash flows in the economic analysis; |
| (viii) |
tax rates and royalty rates
applicable to the proposed mining operation; |
| (ix) |
the availability of acceptable
financing under assumed structure and costs; |
| (x) |
anticipated mining losses and
dilution; |
| (xi) |
reasonable contingency
requirements; |
| (xii) |
success in realizing proposed
operations; |
| (xiii) |
receipt of permits and other
regulatory approvals on acceptable terms; and |
| (xiv) |
the fulfilment of environmental
assessment commitments and arrangements with local
communities. |
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
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