Lavoro plans to close 70 stores in Brazil following a net loss of R$267.1 million in Q1 of fiscal 2025. This closure represents about one-third of its retail footprint in Latin America, with financial struggles attributing to reduced revenues and higher costs. The CEO anticipates significant cost reductions post-closure, while the company adjusts its revenue projections downward for the fiscal year.
Agricultural input distributor Lavoro announced plans to close 70 retail stores in Brazil after reporting a substantial net loss of R$267.1 million in Q1 of fiscal 2025. This closure, affecting about one-third of its retail locations in Latin America, comes as the company operates 223 stores regionally, with 187 situated in Brazil. The specific store locations impacted have not been revealed, but the aim is to complete these closures by March 2025.
CEO Ruy Cunha emphasized that these store closures will lead to “significant gains in cost reductions and working capital over the coming months.” The financial outlook worsened significantly compared to the previous year’s loss of R$71 million, with the current decline attributed to a R$152.1 million negative impact from deferred tax credits and a R$60.7 million rise in financial expenses.
Additionally, Lavoro reported a 13% drop in revenue, totaling R$2.05 billion, largely due to falling input prices and liquidity issues within the agricultural sector. When converted to U.S. dollars, revenue decreased even more sharply, with a 24% reduction to $370.2 million, exacerbated by the Brazilian real’s depreciation. However, there’s been a slight improvement in gross margins, which increased by 3.2 percentage points to 15.6%.
Lavoro experienced a growth of 10% in gross profit in reais, reaching R$321.2 million, despite a 4% decline in dollar terms. Adjusted EBITDA fell 5% to R$54.4 million, impacted by rising operating costs, including higher personnel expenses and inventory provisions. The Crop Care segment displayed strong performance with a revenue boost of 68%, although the agricultural retail segment’s revenue in Brazil dipped by 23%.
Cunha noted improving farmer sentiment but recognized worsening liquidity in late 2024, leading to more conservative risk assessments by financial institutions and suppliers. This situation was intensified following the court-supervised reorganizations of major companies like Agrogalaxy, tightening inventory financing conditions. Furthermore, Lavoro faced inventory shortages during essential periods, like the soybean crop cycle, though restocking efforts are currently in progress through supplier negotiations.
Due to these ongoing challenges, Lavoro has revised its fiscal 2025 revenue projections, estimating between R$6.5 billion and R$7.5 billion—lower than previous expectations. The company has also adjusted its forecast concerning growth in adjusted EBITDA, signaling a more cautious outlook moving forward.
Lavoro is a prominent distributor in the agricultural input sector in Brazil, holding numerous retail locations across Latin America. The company’s financial struggles have compelled it to take drastic steps, such as closing 70 stores. Internal factors such as increased operating expenses and external pressures, including market liquidity issues and competition, have compounded its financial instability. Understanding these dynamics is crucial to grasping Lavoro’s current position and the implications of the store closures.
Lavoro’s decision to close 70 stores reflects significant financial distress, with losses reported in the hundreds of millions. The company’s efforts to cut costs and restructure operations through these closures aim to stabilize its financial footing amid falling revenues and increasing expenses. As it navigates a challenging agricultural market in Brazil, Lavoro’s revised revenue expectations further indicate the severity of its operational hurdles and the cautious strategy it must employ moving forward.
Original Source: valorinternational.globo.com
