The executive director of Boa Safra projects debt close to zero at the end of 2024 and says that the company has surfed a wave of defaults in the sector (Photo: Disclosure)
The CEO of Good Harvest (SOJA3), Marino Colpo, said, in an exclusive interview with Money Times, that the request for judicial recovery and AgroGalaxy (AGXY3) worries the agribusinessbut said he did not see a crisis in the sector.
“The news is bad for the market in general, as it is such a large and sophisticated company, with access to the market like AgroGalaxy. The sector faces a major challenge, which is access to credit, because the producer always needs cash, and the input purchasing cycle takes place between August and October, but the harvest only begins in February. There is a billing challenge.”
Colpo comments that access to credit began through agricultural programs, and then expanded to private banks, more recently reaching the capital market via the issuance of CRAs (Agribusiness Receivables Certificates), CRIs (Real Estate Receivables Certificates) and opening capital by companies.
“At this point I think the AgroGalaxy case is very bad, since there were many CRA's and Fiagros involved in the process, being itself a listed company. It generates investor distrust about the sector, since if he loses money with Fiagros, he puts the assets on a blacklist”, he sees.
“Close to zero” effect for the company
As for Boa Safra, the CEO highlights that the impact on the company with AgroGalaxy's RJ request was low to minimal, as there were few sales made to the company. “The reflection is close to zero”, he adds.
“I don't see a crisis in agribusiness, but rather a troubled moment, because soy went from R$200 to R$100 in two years, with the margin going from 40% to 20%. The producer who has a normal level of debt is calm. I believe there may be new RJs, but I don't believe in a flood of requests. However, due to the smaller margins, the producer and company that committed itself to a very high level of debt is stuck.”
Colpo reinforces that it is not difficult to notice, for those who know the sector, companies that find themselves in a delicate situation. “These companies or producers put themselves in a difficult situation, as they did not take advantage of the previous good price period. Now, for the producer or company with a low level of debt and low net debt, the activity continues to be profitable, despite being in the worst moment of the cycle, in my view”.
Seed resilience and default
The CEO of Boa Safra highlights that the company managed to overcome default in the sector. “We give credit, but not much. In 2023, we had revenues of just over R$2 billion and granted R$450 million in credit, almost 25% of revenues. To date, our default has been R$7 million, 1.5% of the total granted at a time when many companies have had serious problems in agriculture. I consider it a victory for the company, as this number could drop to 1%.”
Colpo highlights the company's low level of debt, which according to him, should end 2024 close to zero. “It is an extremely deleveraged company and I think that this brings many possibilities for mergers and acquisitions, to expand more aggressively, taking advantage of this moment.
He also emphasizes the resilience of the seed sector, citing that 2023 was a bad year for companies in the sector listed on the international market, mainly in the fertilizer segment. Colpo comments that 90% of the company's revenue is concentrated in the second half of each year, when the producer purchases the seed.
“When you look at the inputs, the What fell least was the seed, even though it always brought a lot of innovation. Fertilizers and chemical and biological pesticides saw greater price drops. In 2009, seed represented 9% of the cost of farming, and today this is 16%. In 14 years, I will project 25%, due to the highest level of technology”.
SOJA3: The moment of action
In 2024, Boa Safra's shares fall 24.30%, accumulating a drop of 8.74% in September. For Colpo, the retreat is a bit shocking. “I remember that when we carried out the IPO, they told me that it was cheap. It was a company that made R$70 million in profit in 2020, being valued pre-IPO at R$700 million, 10 times the profit, with many expecting 15 times the profit”.
“We did the IPO, raised money, invested in new plants, machines, CDs and equipment. We left from 3 plants to 14 with follow-on, and the company profit came out of 70 million to R$ 245 million in three years. We didn't do anything different from what we promised in the IPO, but today we delivered almost R$250 million in profit and we are worth R$1.5 billion. If you stop to think, the company doubled price, but our profit quadrupled“, he adds.