This sucks :-(
Verde Provides Update
BELO HORIZONTE, Brazil, Sept. 09, 2022 (GLOBE NEWSWIRE) -- Verde AgriTech Ltd (TSX: "NPK") ("OTCMKTS: "VNPKF") ("Verde" or the "Company") informs that roadworks it was performing for increased truck accessibility to and from its second plant ("Plant 2")1 incurred unforeseen groundwater issues. The solution is already engineered and being implemented. As a consequence, over the next 4 to 8 weeks, limited delivery of Plant 2's production will be possible, with an impact to the Company's 2022 results.
Plant 2 is ramping up production to 1.2 million tonnes per year ("Mtpy") of Verde's multinutrient potassium product, K Forte(TM), sold internationally as Super Greensand(TM) (the "Product"). As part of Plant 2's logistics, the Company has been upgrading road infrastructure, including 22 kms of roads, 14 kms of asphalting, and the construction of a new bridge. At its peak, the Company employed 350 people in the construction works of Plant 2 and correlated infrastructure, currently 125 people are working on the road foundation to overcome the groundwater issues.
The unforeseen groundwater, which placed in risk structural stability, was detected in two critical points of the road. The preceding geotechnical drilling had not uncovered the risk areas and palliative groundworks proved insufficient to adequately remediate the situation. The revamped foundation work will delay the road's operability. Therefore, the renewed road will only support Plant 2's output in Q4 2022.
2022 GUIDANCE
Brazilian agricultural seasonality sees peak demand for Product in Q3 and early Q4. Plant 1 is operating at capacity to meet that demand but Plant 2's delayed output will miss most of the 2022 season's peak demand, thereby negatively impacting the Company's full year volume. Verde is still in line to meet its original 2022 Guidance,2 as revised below for Q3 and Q4 in comparison with the realized results for Q1 and Q2 2022:
Period
| Q1 2022
| Q2 2022
| Q3 2022
| Q4 2022
| FY 2022
| Guidance
| Original
Jan 2022
| Achieved
in Q1 2022
| Original
Jan 2022
| Achieved
in Q2 2022
| Original
Jan 2022
| Revised
Sep
2022
| Original
Jan 2022
| Revised
Sep
2022
| Original
Jan 2022
| Revised
Sep
2022
| EPS (C$)
| 0.02
| 0.06
| 0.18
| 0.19
| 0.25
| 0.12
| 0.06
| 0.13
| 0.50
| 0.50
| EBITDA (C$'000)3
| 1,358
| 3,678
| 10,155
| 10,765
| 13,414
| 8,040
| 3,506
| 8,808
| 28,433
| 31,291
| Revenue (C$'000)
| 10,070
| 11,304
| 21,954
| 24,861
| 27,228
| 24,691
| 13,011
| 25,762
| 72,263
| 86,618
| Sales target (tonnes)
| 115,000
| 111,667
| 200,000
| 202,255
| 250,000
| 188,000
| 135,000
| 198,078
| 700,000
| 700,000
|
Following the lower than expected deliveries from Plant 2 because of logistical issues during Q3 2022, the original 2022 annual Guidance is expected to be achieved thanks to Plant 1's continued operation at capacity and Plant 2's successful commissioning and dispatch of Product within the next 4 to 8 weeks.
Client's demand for Product continues to outstrip current delivery capacity. The Company is offering discounts for Q4 2022 and Q1 2023 delivery, in order to maximise Plant 2 output in those seasonally weak months, as well as to generate more market penetration.
For 2023, Verde's sales volume target remains unchanged at a minimum of 2 Mtpy tonnes of Product. Construction of Plant 3, which is expected to add a further 10 Mtpy of Product, is pending government permits and is therefore expected to begin construction in 2024.
PLANT 1 AND 2 CAPACITY EXPANSION
Over the years, Verde has optimized processing routes and machinery calibration. Therefore, in light of such experience, both Plants 1 and 2 are being re-assessed to determine how equipment and process optimization will enable increased production volumes beyond their current nominal capacities. To implement the potential upgrades, Verde will apply for relevant government licences for total Plant 1 and 2 capacity exceeding 2.8 Mtpy.
PAID FOR GROWTH
Paid for Growth ("P4G") strategy, a cornerstone program aimed at distributing gains to shareholders either through share buyback or dividends,4 will be withheld for 2022 in order to ensure Verde's continued accelerated expansion, including Plant 2 and Plant 3, without issuance of new shareholder-diluting equity. P4G is expected to distribute Verde's first gains to shareholders in 2023.
"While it is disappointing to face a delay at the very end of what has otherwise been a 'non-equity financed' construction of Plant 2, we are pleased by the overall pace and safety of the endeavour. Supported by the growing demand from current and new clients, at Verde we look forward to a future of sustainable and steadily expanding production. In that spirit, we celebrate our Plant 2's commissioning and our 2022 outlook for over 70% year-on-year growth of production. We hold our heads high and look forward to advance the P4G strategy and lead our market segment in Brazil in the near future," commented Verde's Founder, President & CEO, Cristiano Veloso.
BOARD REVISION
Verde is concluding a renewal of its Board of Directors to better meet the threshold set by certain shareholder advisory firms, which have deemed part of its Board as 'non-independent directors' either because the directors hold too many shares in the Company or the directors have held extensive tenures. Therefore, the following directors will gracefully step down: Mr. Getulio Fonseca, Mr. Paulo Sergio Ribeiro and Mr. Michael St Aldwyn, who have served on the board of Verde over a combined 24 years.
Mr. Fonseca was appointed to the Board in 2007 and was a contributing member of the Audit Committee and the Chairman of the Compensation Committee.
Mr. Ribeiro was appointed to the Board in 2017 and was a contributing member of the Corporate Governance & Nominating Committee.
Mr. St Aldwyn was appointed to the Board in 2018 and was a contributing member of the Audit Committee, and Compensation Committee, also serving as the Chairman of the Corporate Governance & Nominating Committee, and as Lead Independent Director.
"We would like to thank Getulio Fonseca, Paulo Sergio Ribeiro and Michael St Aldwyn for their many years of service and contribution to Verde's growth. Their experience and inputs were invaluable to the Company, for which I thank them on behalf of Verde's team, our shareholders and stakeholders," commented Mr. Veloso.
The Company will seize the opportunity to enhance Board diversity and, in light of Verde's recent move to Singapore,5 to comply with local regulations that mandate that at least one board member needs to be a Singaporean resident. The Board changes are expected to be concluded and announced in the following weeks, without material impact to Verde's ongoing expansionary strategies. |
