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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good morning. Welcome to the video conference of results presentation of the fourth quarter of 2023 from Vittia. This video is being recorded and will be accessed at a later time on the website of the company and also the official YouTube channel. The presentation is also available for download. [Operator Instructions]Before continuing, I would like to reinforce that the declarations are based on decrees from Vittia, and the current information are available for the company. These declarations may involve risks and uncertainties due to the future events and depend on circumstances that may or not happen. Investors, analysts and journalists must consider that events related to the macroeconomic environment, the segment and other factors that may make the results be materially different from those in the perspectives.We have here Wilson Romanini, CEO; Alexandre Del Frizzo, CFO and Director of [ E&I ]; and Henrique Monteiro, the R&D Director. And I will pass the floor to Wilson to begin the presentation.
Thank you, Thiago. Good morning to all of you. We are going to present the results of the fourth quarter and the closure of the year of 2023.We had a gross revenue in the biological segment of BRL 78.1 million, 8.8% more than the previous year with a revenue of BRL 248.3 million with a growth of 10.1% with regards to the previous year. The range of biological defensives had BRL 54.8 million, 3.8% more than the former quarter and BRL 165 million in the total of 2023, which is 9.2% more than the previous year. The net revenue is BRL 243.3 million, 5.7% more than the former quarter, BRL 756.1 million for the year, and it's BRL 11.2 million less than the previous year. The net revenue is BRL 41.2 million in the fourth quarter, 16.2% less than the former quarter and BRL 97.3 million in '23, 24% (sic) [ 34% ] less than '22. The EBITDA adjusted totaled almost BRL 50 million, 16.6% less. And in the total of the year, BRL 141.7 million, which is 34.9% less than 2022. The CapEx totaled BRL 11.9 million, 3.8% more than the former quarter, BRL 50.1 million for the year, 18.2% less than 2022.Talking about the year, this is very important -- of course, you want to show the best result possible. But I think that is very important. You're seeing the current scenario in the agribusiness. You can see the result that the companies are giving and we truly had, within the sector, a very challenging year. We had the climate issue. It was very spoken by those responsible, the issue of El Nino. And there was a delay in plantation in Brazil and of course, it created a great concern for rural producers. I always say that any company or a person, whatever that may be, we have 2 issues. The issue of expenses and the revenue. The revenue is something that comes according to the intensity and the will of the market. But within Vittia, we do a lot of work to have a critical basis thinking effectively in rationalization. We have been doing this since November. We believed that the year would be a little bit better. We lost some investments. Of course, we were not able to perform effectively in the year of '23, but we had good things happening also. We will take profit on this over the next years.And then what the producer did, he had an expectancy. He was very careful by seeing that the revenue would be smaller in this year of '23, the harvest of '23, '24, they have reduced their investment. This is very clear. In the period of '23, we had a drop on prices of the commodities, the main ones like soy and corn. And automatically, rural producers did their homework, which is the role of any company, any person in their activity. We have also seen -- you can see even the own difficulty of the chemical sector and excess of stocks, both in the distribution as in the rural properties. Of course, this inhibits anything in terms of growth of revenue from the companies. The -- we had already sent our products and everyone had worked in a very hard way to try to deplete this.When we talk about risks and opportunities, I think it's important to say that we have a considerable drop on the commodities for soy and corn. Other commodities have been going well, which is effectively the case of sugarcane, coffee and Vittia, of course, is working on these cultures. We have also opened some fronts in the market of HF. So of course, we have difficulties that we still need to work on even though -- and even though we have this, we also work to seek alternatives in the market to reinforce the revenue of the company. Another important thing to highlight is that everyone is now forcing a very interesting crop consolidated in Argentina. The break of the harvest in Brazil is something that is very difficult to understand. You have CONAB, many references. So we still have not this finished yet. We have an expectancy that the harvest is a little bit smaller than CONAB has announced but we will only see this better in 60 days.There is an important issue that everyone has an expectancy. So when we talk about consumption and world offer of grains, there is a predictability of collection in the U.S. We know that this may not happen. And when this does not happen, the scenario changes completely. I am the one that has been working on this for more than 30 years. It's not the first crisis and won't be the last. But the agribusiness is very dynamic, changes from night to day. So we are there, we need to have a commitment within the company to understand this movement and change ourselves according to this. You can see the issue of the increase in biological product. I can see that this is more than consecrated by many players in the market that the thesis of biological truly has a good strength on the substitution of chemicals. We have been -- we have worked on some products in which we had a much better performance in the control of playing the biological products. It's what I say, we effectively are in the process of teaching others, and this is what will be continued within Vittia.The Vittia's positioning, we continue to invest in R&D. We have a great pipeline of innovations. We focus on this even foreseeing viewing for different markets. So this is an intense work within Vittia of bringing new technologies, products. This is what Henrique works on in the company, and we believe in this work within our company. The financial discipline, we see this very intensively in the company despite all the issues and the difficulty within the company that stays leveraged. I think that this is the greatest way to be there working on the agribusiness because we have moments and moments. And they have already gone through moments in which we had a greatest leverage, with crisis in the sector, and this makes us learn and have a different policy to have a greater sustainability with the other years. Well, it continues very intense, the focus on commercial relationships with distribution, cooperative and rural producers.Now I will pass the floor to Frizzo which will speak about the numbers of the company.
Thank you. Beginning by the revenue, our gross revenue, we had a drop on consolidated revenue. Looking specifically towards the segments, we have an increase of revenue in biologicals, both into the bio defenders and inoculants. And in the soil micronutrients, the most affected parts were the where they are more commoditized. We had not such a good performance in organominerals, as we have discussed and also in the part of industrial projects and others. I would like to highlight that we had a year with a lot of impact with regards to prices and demand. There was a lot of adjustments. The company had a performance in terms of volume that is similar to 2022. And in terms of prices, we dropped around 11% in the consolidated value. No line -- there was a growth in price. We all had a drop in prices. And this will be the motivation of the drop of the margin in practically all segments as we will see in the next slide.So we finished the year with a drop of margin in our 4 segments. In general, this happened due to the drop of prices without the corresponding drop in our imports and production costs. The drop in prices is connected to the drop on our clients, as Wilson mentioned, this was a year of adjustments mainly with grains, which reflected on some other cultures, apart from sugarcane in which we see that is living a different moment right now. But now Vittia positions itself mainly on grains despite having acted on sugarcane, cotton, HF. Most of our businesses is focused on grains, and we were affected by this market moment. The part of organominerals, we had a sinister that caused harms of BRL 1.5 million, but this will be covered by our assurance, but there was still no coverage. So we have this BRL 1.5 million contributed negatively in the fourth quarter.With regards to the expenses, as Wilson mentioned, this was a year in which we hoped for growth on demand and we planned for this. We planned for the harvest with anticipation while constructing our teams, our marketing plans. And this was what we hoped for throughout the year that this market would happen and it did not happen. As we finished the year with a growth in selling expenses of around 16%. That contrasts with our drop in revenue, we ended at the end of the year, only taking the due measures to stop the growth in expenses, seeking to adequate what is under our control to the current scenario of uncertainties in the area of demand.As a result of a scenario on drop of revenue and prices, we had a drop of EBITDA in which we had an impact on the drop of the margin, the gross margin and the expenses that ended up growing throughout the year and had no revenue -- corresponding revenue. So we went down 34.9%, a superior drop than the revenue one, and our margin went down 25.6% to 18.7%. Regarding the CapEx, we continued with our yearly plan. We concluded the second phase of the plant of biopesticide, including -- increasing the fermentation, soil fermentation. We also did the investment in liquid fermentation. And now we have the capacity -- estimate capacity considering seasonality in 8 million liters per year. And Phase 3, that we always talk about is the one of increase in complementing our liquid fermentation. We still do not have this in radar in a short term, given this challenging moment of demand.With regards to the cash flow, we had a good performance. We know that most of our employed capital is there. We influence our clients. And when it demands -- when demand grows, we want to have capital to support this growth. And when we have a drop, we free our capital, and this was the year of 2023. So this is a movement that meets what we have in the drop of cash flow into operational terms, we compensate by freeing our working capital. With that, the company, despite having an EBITDA performance that was vastly inferior than the previous year, was able to keep its relationship very close in standards that are still very comfortable. So we finished the year in 0.3%. When we talk about the EBITDA relationship with a net debt of BRL 25 million, we had a performance that was very good with regards to what we have received. We understand that we have a very healthy operation. So we end up being more solid financially and this ends up being an advantage. We are comfortable to continue executing our strategies and to have eventual opportunities whenever they come.In terms of financial results, we have a better result than last year due to the smallest level of net debt throughout the year. In part of income tax and social contribution, we also had a better performance than last year given that some of the benefits such as JCP grew with regards to last year and the subversion was around the same standard. And with the results dropping, so our performance in terms of fiscal terms, the percentage has improved. It's important to highlight this is in our financial demonstrations, the alteration in the legislation with regards to some important incentive, which is for investments that from 2024 due to the change in the law that the government gave. We no longer be able to use this benefit. And as a result of a lower operational performance, our financial performance, that despite having been better than last year, was not enough to cover the operational drop. We had a drop in the net profit for the year of BRL 147 million to BRL 97 million.Now I will pass to Henrique to speak about R&DI.
Thank you, Alexandre. Good morning to all of you.Despite 2023 has been a year of difficult for revenue, Vittia has continued strong with its commitments, with investment in R&DI, where the greatest focus of investments were on biological products, inoculants, biopesticides and also fertilizers. We had an increase of 22% in investments in biological products in relation to the previous year of 2022 and an increase of 12.2% in the area of fertilizers with regards to 2022. Totaling an increase of 19.3% of investments in biological products and fertilizers when comparing to 2022. We had a reduction in the CapEx investment of around 50% because, in previous years, we had already invested a lot in infrastructure and equipment to conduct our future projects. And regarding OpEx, we have increased in 27% in relation to the previous year, 2022.Talking about our achievements in 2023, with regards to the regulation, we had 25 new recommendations approved by MAPA being them 14 regarding to new biological targets approved by MAPA for our bio defenders, both macro and bio, the approval of 2 new inoculant recommendations, one for soy and the other for beans applying through the year, and 9 new technical recommendations of fertilizers in the [ HT ] area to be applied. And also, we had the approval of MAPA with 4 new technologies, 2 pesticides -- biological pesticides on microbiological-based on a fungi that was launched in the beginning of this year. We launched it [indiscernible] for many species of plagues that can attack many types of crops. We also had the approval of a biofertilizer.Now I will give back the floor to Alexandre.
Okay. With regards to the stock market due to this difficult period for the agribusiness, we ended up having a negative performance from the point of view of the prices of our stocks, understanding the value of the company. We have increased the execution of our repurchase program. Our strategy up until our second repurchase program, we have concluded this now in the beginning of the year, and we have launched a third program of repurchase of up to 4.5 million of stock, representing 9% of the free float where we will execute according to the cash strategy of the company.Now we can go for the Q&A.
We will now begin the Q&A session for investors and analysts. If you wish to make any questions, please click on raise your hands to ask by voice or on the Q&A and write your question. And our first question comes from Mr. Pedro Fonseca from XP Investment, a sell-side analyst.
Wilson, Frizzo, Henrique, Thiago, it's nice to speak to you. I would like to follow up on issues that you have already addressed. The first one on the margin dynamics. Frizzo mentioned that the main highlight was the prices. But if you could speak a bit more about the drop of the biologicals. And if the problem was the price, I imagine that the margin is the one that we must look going forward. And even on the margin in organominerals, it would be interesting, a little bit of granularity to understand this performance. If I'm not mistaken, please correct me, the level of stock on the company was already adjustment or close to it, but we still see a challenging scenario for organominerals. What can we hope for, for when this margin will come back to its healthy standard? And this would be my first one.And the second question that was also mentioned is the growth of SD&A. You mentioned that the company was focused on a growth that did not come. And it would be interesting to understand what were the factors that have most impacted this both in D&A and in selling. It was a relevant growth of selling, almost 20%, if I'm not mistaken. And Frizzo mentioned that some measures were taken to adjust the excess of D&A thinking about the growth that the company is hoping for. So what was done to increase to adjust and what do we hope for 2024?
Thank you, Pedro. I will answer the first question, and then Frizzo will answer the second one, as he's more ready to answer about this. Well, the issue of prices has 2 reasons. You can see that we had -- that we went through 2022, '21 with an increase that was considerable with regards to the cost for agribusiness, this is not only fertilizers, fertilizers was, I mean, absurd for chemical defenders. We had a problem in the chain as a whole with the pandemic and things started to regulate themselves. So actually, we have a drop in prices in some segments of the company that is connected to the reduction of costs.When we effectively go to the biological world, you can see that everybody thinks that the biological part is the solution of the problem. I think it is a great solution, speaking effectively about control. that this takes to Brazilian agriculture in terms of plagues and diseases, but it's not a solution for companies. There are companies that are ready for this. And those who want to be prepared, and we have a lot of difficulty. So an important thing is that there is now and when we see the market as we have lived in 2023, we've been a retraction in terms of demand and excess of offer that reduces the price. It's natural. You even know more about this than we do.Drop in prices will continue. Yes, will continue. I think that technologies -- the existing technologies have begun to enter on a process, some technologies. There are good products in the market. We have ones that we do not see quality and efficiency. But as it is a new business, I think that the own rural producer is still not noticing this very well. This will be noticed. And certainly, we will reach a point where things will be much more aligned for those companies that truly did their homework of having productivity, quality, so we understand. And this an important issue that we have is the issue of P&D. So this is headed by Henrique, where we are now working intensively within the technologies that we have to make it more strong and the farmers' perspective on these technologies and not only in new technologies because we understand that we are still in a moment where there is much that will come within the market.And if we take the year of '24, that is still very challenging. The market, there are some people being affected by this. We have a clear perception. I have no doubt that we are going to have a drop in prices in the year of 2024. And then these things will adjust. We are in the market for more than 20 -- for 50 years, and we have come into a minimum standard. This is to stimulate those who do not have capacity for this and things revert themselves. We have seen this movie in the past. We had a product that went down and then it began to gain some traction in terms of valorization. This is the clear law beyond the offer, demand and perception on the user of products. When we speak about organominerals, we truly were able to take that problem that we had in stocks at a high cost.The issue of organominerals, we see a serious thing in terms of a restrictive market in terms on the use of technology and valuing this technology. What does a producer do? They will go within what exists in the market that will bring an effective response there -- to this. So we have a clear thing there as I do not know how this will be in the [ front or I spent less ]. So it depends on the point of view. I think there are certainties and uncertainties within this. This is what we end up doing the rationalization, effectively, of our daily basis. For you to have an idea, we are always hearing things, and we can see some crops with biologicals producing more than by the pesticides, but this may create for more investment.And you say, well, I know it works. I know it happens, but I am fearful. So what will I do? I will do my homework. This is the work that Vittia needs to do. We need to prove effectively because by using these technologies, the farmers will be more efficient in their work. And speaking about the organominerals, we are doing some rationalities, we are minimizing our activity and impact, which is an industry that is very expensive and we are strengthening our operations in [indiscernible] where we have a very modern industry with high production capacity and a production that is infinitely better. So we understand that we begin to have a better path in this area of organominerals. And this is because we understand that producers are retracting with technologies that end up costing and they will not know what they will notice.So then I pass to Frizzo, the SD&A, and they pass it to you.
In SD&A, we -- as we sell technologies, we have a big investment mainly when you look at the commercial line in teams and marketing. So we need to begin this before the harvest because I need to have my team on the field doing the trainings with reselling, doing lectures, showing products, showing -- doing this side by side. In these events, we do have -- do not have an expenditure with a percentage on the revenue. This is a commission, this commercial revenue. Most are people that spend on marketing as we had an expectancy of a big growth. We put more people in the field. We did more events, more actions to disseminate this technology.As Wilson said, given the moment in the market, I think that the degree of adoption was much lower. Despite this, the adoption happened. We had a growth of volume that was much superior to the revenue. As I said, we had a drop in prices, given that we began in biologicals, around 10% of growth in the revenue. The volume was above 15%, but it was not enough to dilute our costs. We even talked about the second phase of the solids to go on, and we still were not able to dilute the costs of the second phase. And beyond this, we had a drop in prices.Talking about expenses, of course, we had then R&DI, as Henrique mentioned. He drops majorly in administrative expenses. What we are doing is we are not taking down our structures, our strategies. We reduced the teams, the money for our development. We reduced all this effort. So we would not have an uncertainty in the market, both for producers and the industry. And also, as the producer itself and in the uncertainty of the revenue, I will spend less. And this is what the producer is thinking about, and we need to think the same because with the climate issue and the prices, even though producers understand the technology can bring a higher productivity, it has a risk, a risk of prices that is very high for them and the climate risk that I can sometimes put a product that will deliver more, but if it does not rain, we know that there are no miracles.So even though we had great technologies in the market, both about the seeds, nutrition or whatever, nothing will resist a lack of rain. So we have this philosophy and we have a goal of having an expenditure similar to the last year. We won't be able to reduce, but the idea is to have it in the low threshold. We -- this is the idea. We believe in the market. Things may turn, but we cannot de-structure the company. We have a comfortable financial situation to keep our project.
Excellent. This is very clear. Just to confirm here. I think it was very clear the rationale that you imagine. We still have a drop in prices for the year. And it's possible to imagine that in biologicals, beyond the drop in prices, we're going to see the drop in margins in 2024. Is that it?
Pedro, well, we do not work for this. But within what we have been feeling mainly because we are -- I mean, almost in the last quarter of the year. At the end of the first quarter of the year, we're going to -- we believe in this, we're going to have a drop in prices and margin. There is something very important in this. I say that everything that we have in difficulties, if you are wise, you can take some good things from there. Of course, we are going to see a lack of entrances as what's happening due to the regulations that were more accessible, a lot of people betting that this would be the silver bullet. And it's not. We have lived good periods. We will live good periods going forward, and this will be intensified in the R&DI. This is what we work for, what we believe in, but the market is now retracted in terms of demand. And we have a good offer within the market.So when you have a retracted market and a good offer, consequently, there will be a drop in prices of biologicals and drop in margins. What Vittia did long ago and it knew that not only the segment of biopesticides or inoculants, we -- in the Foliar Fertilizers, because it do have moments and Vittia is ready to face this. I think that this is one important thing. We have the industry. We know how to produce with a good price. So that's it. Those who did not prepare themselves will perhaps have some difficulties to face this competitive market.
Our next question comes from Mr. Gabriel Barra, a sell-side analyst from Citi.
I have 2, 3 follow-ups to do. First, looking at the dynamic for this year, one that is still complicated for the sector, perhaps with a compressed margin, with prices going to a normalized standard. But I would like to explore what do we hope for going forward? What does the margin scenario of the sector? Perhaps the last 2, 3 years were good years for the agribusiness, we have seen not only this for you and other companies with regards to the reduction of the margin. But we also believe that somehow this margin of this last year and of this year, is one that is not reflecting what will be the sector. But if you could mention where this margin should stabilize going forward, what would be the run rate of the sector, mainly in the biologicals, where this is the -- seems to be the most virtuous path for the company.Within this, we have discussed about biologicals and et cetera, but we did not speak about even the business. If you could speak more on what we could hope for of specialties, main chemicals, et cetera, I think it would help us to compose better this 2024 for Vittia.And the last one, just to finalizing in regards to the allocation of capital, you approved another repurchase plan. And I would like to understand your strategies for the allocation of capitals. I remember that you mentioned and apparently, you're always open for M&A and et cetera. Most of the company's growth in the previous years came from M&A movement, and we have seen an active industry in this. Going forward, what could we hope for to continue with this repurchase programs? To seek some targets for the allocation of capital, given the scenario that we also mentioned that is a little bit more difficult. Just to understand where you're going forward. This is what I wanted to ask.
Well, the issue of the margin, we have our business plan for '24. Your observation is a fact. I think that we -- in the previous years, we had interesting margins. And this year, there is a drop. Vittia works to have a margin that may satisfies it. This is the main point. And of course, internally, you have mechanisms that are worked on for this. Vittia, possibly this year, will have a good news and something effectively viewing an increase in the margin in the company to leave this standard that we came through and to try to find what we were already able to do. But of course, we have many internal challenges, many things that we need to develop, and this is not something that effectively depends only on us. It's a structural issue.But what do I want to show is that we are working every time understanding that some technologies tend to have a smaller margin, even the issue of the biologicals and special fertilizers. But internally, we have been working to seek innovation, technology, resolution of problems in the field that will help the company. This is our work. But we are in a year, well, if we see after going through these 3 months, we're going to see --if you ask what's the light at the end of the tunnel, I mean, it's still not there, being very clear with you. It's something that we have as a characteristic, one that is already within the company. Vittia is a true company on what it does. It has high-quality products. It has no low-quality products. We're also going to tell the truth, the partnerships that we have in the field are highly clear. That's it.If we analyze the moment that we are living within the agribusiness, we still do not have a light to say, well, how is going to be the end of the year? Is it going to be better, worse? I mean, we cannot know. So we cannot sell a fantasy to you. What I can tell you is that we are working with a reality that we have the current expertise to seek a better result. This is our -- well, I believe in work, work wins it all. Crisis is the ones we're going through. I have seen many. And I mean, we need to understand this moment, we need to work through it and effectively speaking about the other businesses within the company.What can I tell you? Of course, you may see even when talking about our investments in R&DI, we have a maxification of the biological world. You can see that there is a substantial change in this sense. But within Vittia, we have worked and these were things that were set long ago to have a greater production capacity. Nowadays, Vittia is a company that when we look towards our line of fertilizers, there is no company in the market with our portfolio and industrial dynamics. So we understand, we are now even directing our team. We have technologies that truly make a difference in the issue of efficiency and what we work on effectively is the commercial marketing is to have this more efficiently in the field, both taking some crops that we still did not have an intense activity, and we are performing to work on our special fertilizers.We have the launch of a different project -- not launch, but we have a reformulation of a product that brings an enormous benefit, and we are working on it. So I mean, the company work does never end. And when we speak about this, I think if Frizzo can enlighten more, we are looking at the opportunities every single time that we know they are there. And I think that Frizzo later may speak better on this about the repurchase and M&A.
Well, I think that just as an overview to complement on this, in retraction years, as we have already seen, we had a margin in all segments, not only in biologicals. We had an issue in organominerals and in our industrial lines and distributed products. So it's natural that we later, when the environment comes to normality, for us to have a recovery in our margins. When will this happen? As Wilson said, we cannot say we have a scenario that is challenging for '24. Wilson mentioned that things may change depending on the American harvest, but we still do not have the issue of the American harvest in the game.We have a challenging scenario. We have the prices of the commodities, and we do not see possibilities in this scenario of a great recovery in biologicals. It will happen as it happened in nutrition. We have some products that will be used as commodities, and we will have to launch greater margin products for this -- to propel these technologies in our markets and throughout time, keeping an average margin between products with higher technologies and lower technology. In our biological lines, we have products that are marked as commodities. We have a reference product. We -- the registry is easy, and we have products that are different that come from Vittia, developed internally and that we can work with more ease.And then as Wilson said, we have -- we are bringing new technologies. And this margin, we had a gaining margin going up 20%. But if we take the history of the company speaking basically of when -- of how long I have been in Vittia, we had no margins of EBITDA that is lower, much lower than 2023. The -- even before having the strength in biological, it would stay close to 20%. I think that within a more favorable scenario, we are going to recover our margin in all lines. And we also have our work, our daily work of seeking differentiation because products that are commoditized will only lose margins. And talking about our allocation of capital, I think that we have been happy, let's say, in the sense that we have waited a little bit, and we have had a lot of criteria.We would not like to execute the repurchase program, as I always say. The idea is to be as close to the market as possible. We even would like to make new offers, improve the liquidity, this is what we would hope for. But from the moment that we also see opportunities, good opportunities for those who -- for shareholders who are repurchasing in interesting values, we need to do this. Of course, we will do this carefully. We will not allocate this all at once and observing the opportunities that are in our radar. But this is a dynamic environment. Each drop that we have in our shares, changes our appetite for M&A and gives more appetite for our repurchases. It's natural. We have these opportunities that we are always looking at what is the better.And when the scenario changes, and we change our strategies, this is the allocation of capitals. We do not have this defined. We need to see what is the best opportunity for Vittia's shareholders. That's it. And we are constantly monitoring and work on these 2 fronts, repurchase and M&A and eventually even the organic investments. Of course, they are, even in this scenario that we have, that we do not have our demand so strong in this. For now, they are still not in our radar.
Our next question comes from Larissa Perez, a sell-side analyst from Itau BBA.
Can you hear me well?
Yes.
If I could do a follow-up on the margin of biologicals and even using this historic knowledge that you have, I would like to understand if there is a cost that we can adjust on a short term. Frizzo mentioned about working on expenses for research and so on. But in previous years, when you have lived this moment of closer margins, if you have seen a possibility to adjust costs? And a second question beyond this theme of biologicals is the fiscal issue. Frizzo mentioned the end of fiscal subvention, how do you foresee this sector, how it would react to this -- fiscal subsidy, sorry? If you think the industry will perhaps absorb a little bit of this impact, how is this issue with the sector in general?
Frizzo, I think if you could answer this.
Okay. We -- to be honest, we are not hoping for no pass-through. It was an alteration on the 29th of December that took everyone by surprise. For now, we truly see that there is no way out on how this was done. We are not seeing any problems for agro for now. And it's that issue in the market in the way that we are living in pressured by prices with a retracted demand, the industry will not be able to have this power of passing the prices. I do not see it like those. We will have an increase on the fiscal charge without having this power. This is our view. We are going to have to work on this. And this is how legislation works. The governments increased taxes and takes our [ competitivity ] and makes us have to work more in other ways to compensate this. That's it.I don't think -- I don't know if Wilson has a different view.
Yes, I see it in the same way, but an important thing, we have lived without this for long and we lived well. I think that we need to adapt within the new technique in terms of the taxation within the company, and we need to understand that this does not interfere in our EBITDA, and will interfere in our net profit. It was Frizzo said within what we could do to use these incentives, we have used it, and now we are going to have to live without it. So this -- I mean, I do not see have a way to transfer this, I mean, because this is cost, these are taxes.
I don't know if you want to complement, Wilson, on the other part. She was asking on costs.
Yes, if at such a moment in the past, you have already worked on this, if you can see something similar.
I mean I think you're better Wilson, because I only have 10 years, we have 30 in the market. So you have more experience. The only thing I can say about cost is that, I mean, there is no great cut what we have. There are many strategies that take a while, as Wilson mentioned, we are focused on grains. The greatest problem now is grains with adjustments. We have a lot of work with other cultures, but this takes a while up until the market regulates itself. So these are our actions. And as I said, as for the cost, when we have a demanding market, we make adjustments to have more people, more marketing, but if you're seeing, well, you visit a green producer, talk about technology and do not want to talk about this, it does not matter to put this effort there. We want to direct part of this effort for those who are receptive, but we do not have a way to de-structure the company because these things come back.So to reduce a lot our costs as we would have to, I don't know, let's take some regionals, some structure from Vittia that we create for market development, commercial or either internal. We don't think it's interesting because then the market will come back, and we will not have how to use this market return because it will come back. This is how it works. It has its ups and downs, and I will pass it to Wilson.
So if you look at the last 20 years, where great crisis happened in average, it was like a year. A few crisis, for more than 2 years, but I mean we cannot know how long this current crisis will last. Prices or adjustments matter. No, I think this is what Frizzo said. We need to be very careful. We have did a rationality within the company, looking where is the best place for you to allocate the resource, of course, we will not restructure the company. We believe in our business. We know it works. There are works and works for innovation that will come. So I mean, we need to create an adjustment right now. And of course, we have lived with more risks, lower risks. We always say that we have these 2 dips, revenue and expense, which was very noticeable in the allocations of resources. But I mean, we see like Frizzo said, if things pass.And as I said, I've been working on this for more than 30 years, living within the agribusiness effectively, and it's something that comes and goes. And I'm not that concerned. I think that it's in this moment that we can see those who truly know how to work, to live, and Vittia is ready. So in this shortest term, things will come. But I mean, we need to be perceptive of where we will work on to generate results that we hope for. And that's it. I think Frizzo spoke about it very well. We need to reduce costs, but we will not try to de-structure our company because we know that markets come and go. And we know that we will have our participation -- and a good participation within this market.
Our next question comes from [indiscernible].
Regarding to ICMS, how [ more ] do you estimate that will be the percentage impact in the net margin? Is there some way to diminish this impact?
I don't know if it's ICMS actually for the social contribution that we ended up answering. And in the notes that we have, there is this percentage that represented BRL 21 million in 2023 of social contribution and income tax and around 20% in the relationship with the profit that we have. We would be -- so this percentage is not fixed. It ends up depending on how much we have in benefits of the ICMS, which will change. The [ aliquots ] are different depending on the state, there are products, but this is not a fixed rule. But the estimate is around 10%, but we know that perhaps this would end with the tax reform because now we would have this due to the reduction on the ICMS, the [ aliquot ] of ICMS is growing year by year. So it reduces the benefit. So that's why it does not have this fixed percentage throughout the year. Perhaps we need to use '23 as a base around 20% on the taxable profit with the rest for benefits.
Our next one is from Gustavo [indiscernible].
How are the expansion plans of Vittia? Do you want to open new CDs in the short term? What's the expectation of breakdown between the 3 selling channels.
While being very direct, we are not planning any CD for '24. We opened 2 last year. It's being interesting in this moment where producers are not doing a lot of planning and they're following what's necessary. When they need, we have a rapid response term, but we are also within that philosophy of not increasing costs for '24. So we are going to keep our CDs, but we will not increase costs to have the certainty on the market. So talking about the CDs and what was the other one, the breakdown between the selling channels for the future. We continue with the same strategy. We have been working with our partners, with cooperatives, and we also have an importance in direct selling for main clients, [ fabric ] clients and we keep the strategy to try to access the market within the direct selling and the cooperatives and selling.We were profitable and happy in our partnerships. These are channels that assure us in this moment, remembering that we have another issue in the agribusiness, which is the possible nonpayment. Vittia has still not seen this. So despite our partners, most of them not having lived the year of such a good 2023, most have also lived the reduction, but they are partners that have the same philosophy as us of having a serious work, companies with a long-term view and then that are more certain to go through this moment.
Our next question is from [ Luca Varalda ], a student from [ FGV ].
I would like to make a question first for the request in the beginning of the trimester. We know that there is a delay in the request for inputs. And I want to know how this impacts Vittia? And what is Vittia's position in the distribution to be able to meet the demands that came? The next thing I want to do is the cross, how is it working, if the company can get that client, they pay for the foliar fertilizer, it can be in the biological market, this type of strategy?
Well, we are leaving a moment now within what Frizzo explained. We have the CDs and this facilitates the [ movementation ] alongside rural producers, the distributor. And our portfolio is rational. Producers now are purchasing what they need. So what we have seen in previous years, mainly when there the expectancy on the lack of products in the market in which you had the first and the second quarter full of portfolios, it won't happen. Portfolios are much smaller, are ones that last a few days in the company. They purchase, receive the product and then use it. And we have a nice dynamic in terms of service. Vittia has an excellent logistics and it also has its dynamic on the CDs.So we do not take care of our clients due to the lack of products. We have an entire internal strategy, even for knowledge. We keep our stock capable of meeting our clients' needs very fast. We do not have -- we have not lost business due to this. This is important to mention. And when we speak about cross-sell, this is a constant work within the company. When we offer our product for producers, obviously, we will not only speak about biological or fertilizers. We speak about everything. I think that the nice job with new technologies that Vittia is doing there in the market is opening for interesting opportunities of cross-sell, markets that basically the companies of our segment do not work on much.We come with new technologies, and this is enabling us to work on other products that up until now, we are working on new [ culture of ] crops and new -- putting differentiated products, Vittia technologies and with that, we are increasing the cross-sell of the company.
Thiago, do you have any other question? Perhaps you could go to the end.
A last question. If you could mention on the debt contract with the BNDES and the issue of waiver, how are the negotiations with BNDES if in this first month? There was an advance in this sense.
We have been talking with the BDNES (sic) [ BNDES ]. We have this. And -- but up until now, we had no manifestations. We are not as leveraged as I mentioned. We, obviously, would not like to have any issue with regards to the debt of the BNDES, which is one of long-term. But obviously, we are capable of doing the substitution if necessary. But it's not what we work for the direction that BNDES gave us that we would go for a prepayment. It's much more about adequately basing our request and them having their time and fulfilling with the demand. They have a bureaucratic process for this to be worked on internally. We have the positive response, but this is how the conversations are going.We had [ Votorantim ] waivers that ends up having a very different dynamic. And let's be honest, in the current scenario, thinking about the agribusiness, the programs that came from the banks are much more on those who have difficulties of honoring their commitments or on top of a higher leverage. What happened is that we deliberated on the JCP in total to use the fiscal benefit, and we ended passing the threshold that we have in the contract. And it's important to say that from the last year, this limit is already worth only if we have a leverage above 3x on the debt -- net debt. So on the initial period on the contract that we had, this issue of the limitation for the distribution up to 30% and no matter the leverage.But from next year, if we have a leverage below 3x, we can distribute as much as we want. And our objective is to distribute. We had a PA of 30%. Our objective was not to use more. It was just to use the benefit of JCP in total. Maybe there is another question, then we can later finish.
Our next one is from Jefferson Komura, an investor from Ecoa.
Two questions. How are you following the RJs that are happening in the agribusiness? And we have seen a lot of companies being leveraged in this sector, and Vittia has a controlled situation. Do you think that this may be a good moment to consolidate this sector?
Well, I mean, let me just say about the issue here very fast. Truly, many RJs. We have been following this very closely. Even our portfolio, we had none up until now because the period for receiving this and where things may happen with more intensity is in April 30 to May 30, which we believe that this may be the point for us to know what is the problem that we will have regarding the '23, '24 harvest. Our view is that we will not have something that intends. We have these adjustments, but we do not see this as something systemic, like some put this as a hypothesis. And I think that if it is systemic, something that would be very bad for many, mainly for us, but we would be ready for it.And in the scenario that we are of some RJs and programs, without a doubt, we are going to have a charter portfolio above average. So this is good, both of our portfolio and our leverage is one of the issues that we are ready to [ live ] this moment of adjustments more strengthened, even connecting with what I said, we did not need to end with any regional to end any CD and the company that is there in a situation where they need to have an [ EBITDA ] due to a clause issue or even because they need to sell to do this and pay some commitment, perhaps we need to work on its structure to reduce it. And when the market comes back, it will not be as prepared. So this is a little bit of our view. That's it.If you want to complement?
Well, regularly, you're on everybody's side. I think that you have explained this very well, and this is what we foresee also. I just would like to reinforce, Frizzo said, even to make it clear for you. We will have a great moment, as he said, from April 30 to May 30, but I think that the most critical moment has already gone through. We know that some people do have prolonged their RJs, they'll try to hold on their grains to have liquidity, everything that we had already connected to the tradings which are -- was already delivered. So this is a positive view, and that's it.The government itself is connected to the RJs, the Minister of Agriculture passed a note to the Minister of Justice, making it clear that what is agreed upon in terms of risk, grains and the effective part of fiduciary alienation that this needs to be worth it. I mean, you know the world unfortunately does not have a clear behavior to being truly honest. There are some people that use this moment or who are not needing this very much. Of course, they need to renegotiate something, but they enter an unnecessary dance, let's say, that ends up creating a lot of harms in a long term for those who thought about this. So I think that now we have more knowledge in all senses that RJ is not the best possible mechanism for those who want to continue in the market.
Our last question comes from [indiscernible].
Could you explain the on-farm dynamic? And how do you see this?
Well, I will be direct. We do not believe on this. This week, I had a great opportunity, a great company, and it's one that has within its concept that biologicals are better, but this is a great company. I won't speak the name, but a company is more than 100,000 acres. And it was very profitable. 2 issues. For this company, it's clear that substituting chemicals by biologicals is more than certain. And on-farming is -- and you don't even think about. A company of that size to do investments, they certainly had experiences in this sense. We see that the on-farm issue, in our view, has its day counted, being very direct.Recently, we had a researcher, the one that most understands on biologicals, microorganisms, she did a collection of the on-farm industries, of the properties and the sole thing that she did not find was the microorganism that the person wanted to increase and she talks about it openly within the press itself that actually producers can be [ generating ready ] pathogens for their crop and even for human health. So Vittia thinks that this had some companies that tell this story. Let's say, use this moment of the frailty in the legislation and solve this issue of the producer. We have some producers now which are very close to the company that have already worked with the on-farm. And [ surely ], I mean, they have closed their units and understand effectively that this is a past that could work, but did not work.We believe in the on-farm that I tell about, we have a classic example of a producer -- renowned producer in Brazil, Inacio, that created Farroupilha. He had the desire of biological products, had an interesting assistance. And actually, he built a company that was the Farroupilha Lab that later was acquired by [indiscernible]. So we are skeptical to this. And there's an interesting issue. The prices of biologicals are going down. So it's very clear for producers that it's much more interesting to have within their crop quality products that will effectively solve the problems of plagues and diseases, then doing this within the property, basically, we now have those who came to be and this becomes much more economic for producers considering that if on-farm was effectively a product with efficiency, it's better for them to purchase from the industry than doing in their own property.
The Q&A session is closed. We would like to pass the floor to Wilson Romanini to make the final considerations.
First, thank you very much for hearing us, Vittia's results. And I think that what I wanted to make clear for all is that this is what agribusiness is. It's amazing. It's dynamic, so you have moments of [ escalates ] and moments of drops within this activity. What I can say is that I have been working for a long time in this year. natural, normal moments and difficult moments. Things are dynamic. They change very fast. This is our own repurchase plan that shows that we are very trustworthy with our company and so on. And I'm certain that Vittia is a company that has more than 50 years in the market. It will reach 100 years. We want to have the 150. I mean, I won't be here, but I will be happy for the development that we have been worked on. This is what I can say. This is the moment and we believe in our company.
Okay. Thank you. The video conference is closed. The relationship with investors is ready to answer further questions. We thank you for the participation, and have a good day.[Statements in English on this transcript were spoken by an interpreter present on the live call.]