Business Wire

(All figures are in Canadian dollars, unless stated otherwise. Average exchange rate in Q3 2022: C$1.00 = R$3.99)

SINGAPORE--(BUSINESS WIRE)--$NPK.TO #verdeagritech--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.

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”):

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:

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

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