Lavoro Secures Out-of-Court Restructuring Agreement to Stabilize Brazil Operations

Agreement Reached with Lavoro’s Core Suppliers to Address Supply Chain Disruption

Lavoro Limited (Nasdaq: LVRO, LVROW) announced that its Brazilian subsidiary, Lavoro Agro Holding S.A., has reached an out-of-court restructuring agreement with key agricultural input suppliers. The agreement aims to extend payment terms and secure long-term product supply as part of efforts to mitigate recent disruptions across its Brazil Ag Retail segment.

The agreement, now formalized in an extrajudicial reorganization plan (EJ Plan) submitted to a São Paulo court on June 18, 2025, involves major suppliers including BASF, FMC Agrícola, UPL Brasil, EuroChem, and Ourofino. The EJ Plan, once approved by the court, will be binding on all eligible suppliers, not just the initial signatories.

Multi-Year Supply Commitments and Payment Extensions

Under the EJ Plan, approximately R$2.5 billion (~USD $430 million) in trade payables are to be restructured. The plan classifies suppliers into creditor groups, each with distinct repayment schedules and terms. Key components include:

• Standardized multi-year inventory supply agreements.
• Repayment plans ranging from lump-sum payments to semiannual installments through 2030.
• In-kind payments (up to 40% for certain dollar-denominated claims).
• Inflation-indexed interest (IPCA) across most creditor classes.

The plan affects only Lavoro Brazil, specifically its Brazil Ag Retail segment, and excludes financial lenders, contractors, and other Lavoro subsidiaries.

Background: Market Volatility and Inventory Shortages

The restructuring follows a period of industry-wide turbulence in Brazil’s agricultural input sector. Factors such as falling input prices, severe droughts, and limited farmer liquidity reduced demand and strained inventory financing. In Q4 2024, a competitor’s judicial reorganization further constrained credit availability, contributing to severe product shortages during Brazil’s peak planting season.

Lavoro reported that its prior bilateral supplier negotiations had not fully resolved the bottlenecks, prompting the decision to pursue a collective restructuring. Supply under the new framework has already resumed, the company noted.

Preliminary 2Q25 Financial Results Reflect Market Pressures

Lavoro’s preliminary unaudited results for the second quarter of fiscal 2025 indicate significant declines due to inventory-related challenges:

• Consolidated revenue fell 38% YoY to $384.4 million.
• Gross profit declined 39% to $62.8 million, with gross margin down 30 basis points to 16.3%.
• Brazil Ag Retail revenue dropped 40% to $315.1 million, while segment gross margin fell to 11.5%.
• Crop Care and Latam Ag Retail saw mixed results, with Crop Care revenue down 41% and Latam Ag Retail revenue down 12%.

Lavoro attributed the Brazil Ag Retail decline to order cancellations caused by product unavailability. The company emphasized its focus on maintaining long-term customer relationships by fulfilling orders with suitable alternatives, despite short-term profitability impacts.

Outlook and Next Steps For Lavoro

Citing the ongoing complexity of the EJ Plan and its effect on financial reporting timelines, Lavoro has withdrawn its fiscal 2025 guidance. The company plans to release full financial results once the review process is complete.

Lavoro stated it remains committed to operational recovery and long-term financial stability in Brazil. Additional supplier discussions are reportedly at advanced stages, though not finalized in time for the initial court filing. Upon court approval, the EJ Plan will result in the novation of affected obligations and the regularization of credit-related issues under Brazilian law.

Read the complete financial results here.