Key Takeaways:
- Verde AgriTech Ltd. has secured debt restructuring terms with creditors representing over 92% of its total debt; non-adherent creditors face revised payment terms, pending court approval.
- Restructuring terms for non-adherent creditors include a 75% debt reduction, an 18-month grace period, and TR-based interest.
- Q2 2024 financial results showed a decline in sales due to El Niño-induced drought, impacting fertilizer demand and leading to a net loss.
- Verde AgriTech continues to focus on sustainability, including Enhanced Rock Weathering (ERW) carbon capture and low-carbon fertilizers.
- Recent leadership appointments reflect the company’s strategic focus on sustainable growth in agribusiness.
Debt Restructuring Agreement and Revised Terms
Verde AgriTech Ltd. (TSX: NPK) announced a debt restructuring agreement with creditors representing the majority of its debt. According to the company, over 92% of creditors agreed to the new terms, which are intended to help stabilize Verde’s financial situation. The remaining creditors, holding approximately R$11.3 million in debt, did not accept the initial restructuring terms. For these non-adherent creditors, Verde has proposed modified payment conditions, subject to court homologation.
The restructuring terms for non-adherent creditors include a 75% reduction in the principal balance. Additionally, Verde will adjust the interest rate to the Taxa Referencial (TR), Brazil’s reference rate set by the Central Bank, currently at 0.82% per year. This revised rate represents a significant decrease from the previous interest rate of 16.59% per year.
Non-adherent creditors, if approved by the court, will see their payment obligations deferred under the following terms:
- Debt Reduction: A 75% discount on the total debt amount.
- Grace Period: An 18-month period during which no principal or interest payments will be required.
- Repayment Term: Following the grace period, the remaining debt will be repaid over a 108-month period.
- Interest Accrual: Interest will start to accrue at the TR rate after the grace period ends.
- Repayment Schedule: Monthly installments will be made beginning at the end of the grace period, according to a set repayment schedule.
Verde AgriTech anticipates that this debt restructuring will reduce its overall debt burden and contribute to financial stability amid current economic conditions. If court approval is granted, approximately R$8.5 million of the company’s debt will be written off following the debt reduction.
Q2 2024 Financial Results and Market Conditions
In its Q2 2024 financial report, Verde AgriTech cited a decline in sales attributed to unfavorable market and environmental conditions. According to the company, El Niño-induced droughts and high temperatures affected key agricultural regions, leading to a significant reduction in fertilizer demand. This decline in demand contributed to a net loss of $2.64 million for the quarter.
Verde also reported facing logistical issues and challenges related to regulatory and economic factors in Brazil, where the potash fertilizer market has been impacted by supply chain disruptions. Additionally, a high-interest rate environment has limited the company’s ability to offer financing options to customers, further affecting demand in a market already challenged by volatile conditions.
Despite these financial challenges, Verde has maintained its commitment to enhancing sustainable practices within its product offerings. The company’s potassium-based fertilizers, K Forte® and BAKS®, are designed with carbon-reducing features, which Verde continues to emphasize in its market strategy. Verde has also initiated a Strategic Debt Restructuring Plan in response to the financial impact of these market conditions, which the company views as necessary to stabilize its financial position.
Sustainability Initiatives and Carbon Reduction Focus
Verde AgriTech has continued to develop its focus on environmental sustainability as part of its long-term business strategy. The company’s potassium multinutrient fertilizer, K Forte®, has been validated for its low-carbon footprint, particularly in the production of ethanol for sugarcane and corn. According to the RenovaCalc tool, developed by the Brazilian government, K Forte® demonstrates an 85.6% reduction in carbon footprint compared to traditional potassium chloride fertilizers (KCl). This reduction is seen as an advantage in sustainable agriculture, where carbon footprint minimization is increasingly prioritized by stakeholders.
Verde’s Enhanced Rock Weathering (ERW) technology further supports the company’s carbon removal efforts. By utilizing reactive rock in its fertilizers, Verde enables a natural carbon capture process through the interaction of rock with atmospheric carbon dioxide. In Q1 2024, Verde reported that its products contributed to the capture of 1,131 tons of CO2, and an additional 316 tons of CO2e emissions were avoided. As a result, Verde’s products are positioned as a potential alternative for industries and agricultural sectors looking to reduce their environmental impact.
Verde has also partnered with WayCarbon, a subsidiary of Banco Santander specializing in carbon removal and climate change mitigation, to explore further opportunities in Brazil’s carbon credit market. The collaboration focuses on monetizing Verde’s carbon capture capabilities, including the development of new sustainability projects aimed at scaling carbon reduction efforts within the agriculture industry. This partnership aligns with Verde’s ongoing goal of providing environmentally sustainable agricultural inputs in Brazil.
Recent Appointments to the Board and Strategic Leadership Initiatives
In 2024, Verde AgriTech proposed the appointment of Hannah Oh and Marcelo Duarte to its Board of Directors. Oh, who brings over 15 years of experience from Bayer and co-founded IXO, a company focusing on AI-based carbon credit verification and blockchain management, is expected to support Verde’s approach to sustainable farming practices. Marcelo Duarte’s background in Brazilian agribusiness and international relations is anticipated to contribute to Verde’s growth in sustainable agriculture and resilience against market challenges.
According to Verde, both appointees are expected to bring unique perspectives to the Board. Oh’s expertise in carbon credit verification aligns with Verde’s commitment to enhancing its carbon capture capabilities. Duarte’s experience in Brazilian agribusiness may support the company’s efforts to expand in key agricultural markets, especially as Verde continues to focus on providing high-quality potash-based fertilizers with low environmental impact.
Verde also recently appointed João Paulo Frez as Chief Revenue Officer (CRO). Frez has over two decades of experience in Brazil’s agribusiness sector and has previously worked with specialty fertilizers. Verde sees his role as key to strengthening the company’s position in the competitive agricultural inputs market and expanding customer relationships. Other new appointments include Marcus Ribeiro as Vice President of Sales and Renato Mendes as Vice President of Strategic Accounts, both of whom bring experience that Verde believes will drive growth and support its long-term sustainability goals.
Industry Recognitions and Carbon Removal Efforts
In April 2024, Verde AgriTech was recognized as one of the Top 100 innovators in carbon removal by the XPRIZE Carbon Removal Challenge. This global initiative, backed by the Musk Foundation, aims to identify companies contributing to large-scale CO2 removal. The recognition places Verde among companies focused on utilizing technology to address carbon emissions through natural processes like Enhanced Rock Weathering.
Verde reports that its ERW technology has the potential to sequester up to 0.36 million tonnes of CO2 annually. This technology is supported by Verde’s significant mineral resources, estimated at 1.47 billion tonnes of measured and indicated resources. Verde’s proposal for the XPRIZE challenge focuses on sequestering carbon by crushing and spreading reactive rock, a process the company continues to refine in collaboration with research institutions.
