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. We inform that all participants will only be watching the video conference during the presentation, and later we will have a Q&A session when further instructions will be given. Before continuing, I would like to reinforce that the declarations are based on the creeds 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 Nero Frizzo, CFO and Director of Investor Relations, and Henrique Monteiro, R&D Director. Now I 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 per year, and it is 11.2% 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 2023, 24% less than 2022. 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, we want to show the best result possible, but one thing that is very important, you are seeing the current scenario in the agribusiness. You can see the result that the companies are giving, and we truly had within this sector a very challenging year. We had the climate issue. It was very spoken about by those responsible, the issue of El Niño, 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 person, whatever that may be, we have two 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 2023, but we had good things happening also. We will take profit on this the next years. What the producer did, he had an expectancy. He was very careful by seeing that the revenue would be smaller in this year of 2023, the harvest of 2023, 2024, they have reduced their investment. This is very clear. In the period of 2023, we had a drop on prices of the commodities, the main ones like soy and corn. 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 in 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. 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 H&F. Of course, we have difficulties that we still need to work on.
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 foreseeing 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's an important issue that everyone has an expectancy. 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 products. I can see that this is more than consecrated by many players in the market, that the thesis of biologicals truly has a good strength on the substitution of chemicals. We have worked on some products in which we had a much better performance in the control of plagues, 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.
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. This is an intense work with 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 to 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 I 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. 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 BioDefenders in inoculants and in the soil micronutrients. The most affected parts were where they are more commoditized. We had a not such a good performance in organominerals, as we have discussed, and also in the part of industrial products 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.
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. We finished the year with a drop of margin in our four segments. In general, this happened due to the drop of prices without the corresponding drop in our inputs 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 it is living a different moment right now. Vittia positions itself mainly on grains, despite having acted on sugarcane, cotton, H&F.
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 insurance. But there was still no coverage. 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 finish the year with a growth in selling expenses of around 16%. That contrasts with our drop in revenue.
We ended up 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 corresponding revenue. We went down 34.9%, a superior drop than the revenue one, and our margin went down by 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 estimated capacity, considering seasonality in eight million liters per year. Phase III that we always talk about is the one of increase in complementing our liquid fermentation. We still do not have this in a radar in a short term, given this challenging moment of demands. 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 demand grows, we want to have capital to support this growth. When we have a drop, we free our capital, and this was the year of 2023. This is a movement that meets what we have in the drop of cash flow in 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. 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. With the results dropping, our performance in terms of fiscal terms when the percentage has improved. It is 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 will no longer be able to use this benefit.
As a result of a lower operational performance and 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 our R&D&I.
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&D&I, where the greatest focus of investments were on biological products, inoculants, biopesticides, within 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 investments of around 50% because in previous years, we had already invested a lot in infrastructure and equipment to conduct our future projects. 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, but for our bio defenders, both micro and bio. The approval of two new inoculant recommendations, one for soy and the other for beans, applying through the air, and nine new technical recommendations of fertilizers in the NHT area to be applied.
Also we had the approval of MAPA with four new technologies, two pesticides, biological pesticides, one microbiological based on a fungi that was launched in the beginning of this year. We launched Exalt, 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. Our first question comes from Mr. Pedro Fonseca from XP Investimentos, a sell-side analyst.
Good morning, Wilson, Frizzo, Henrique, Thiago. It is nice to speak to you. Thank you for this moment. I would like to follow up on issues that you have already addressed. The first one on the margin dynamic. 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 at going forward. Even on the margin in organominerals, it would be interesting, a little bit of granularity to understand this performance. If I am not mistaken, please correct me, the level of stock on the company was already at adjustment or close to it, but we still see a challenging scenario for organominerals. What can we hope for when this margin will come back to its healthy standard?
This would be my first one. The second question that was also mentioned is the growth of SG&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 G&A and in selling. It was a relevant growth of selling, almost 20%, if I am not mistaken. Frizzo mentioned that some measures were taken to adjust the excess of G&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.
Thank you, Pedro. I will answer the first question, and then Frizzo will answer the second one, as he is more ready to answer about this. Well, the issue of prices has two reasons. You can see that we went through 2021, 2022 with an increase that was considerable with regards to the cost for agribusiness. This is not only fertilizers.
Fertilizers was 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 is not a solution for companies. There are companies that are ready for this and those who want to be prepared, and will have a lot of difficulty.
An important thing is that there is now, and when we see the market as we have lived in 2023, within a retraction in terms of demand, an excess of offered that reduces the price. It is natural. You even know a bit more about this than we do. Drop in prices will continue, yes. Will continue. I think 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.
An important issue that we have is the issue of P&D. This is headed by Henrique Monteiro, where we are now working intensively within the technologies that we have to make it more strong and the farmer's perspective on these technologies, and not only in new technologies. We understand that we are still in a moment where there is much that will come within the market. If we take the year of 2024, that is still very challenging. The market, there are some people being affected by this. We have a clear perception. I have no doubts 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 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 product. 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 of 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 to this. We have a clear thing there.
As I do not know how this will be in the front or I expand less. 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. You say, "Well, I know it works, I know it happens, but I am fearful. 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. Speaking about the organominerals, we are doing some rationalities.
We are minimizing our activity and impacts, which is an industry that is very expensive, and we are strengthening our operations in Serrana, where we have a very modern industry with high production capacity and a production that is infinitely better. We understand that we begin to have a better path in this area of organominerals. This is because we understand that producers are retracting with technologies that end up costing, and they will not know what they will notice. Then I pass to Frizzo, the SG&A, and they pass it to you.
In SG&A, as we sell technologies, we have a big investment, mainly when you look at the commercial line in teams and marketing. 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 product, doing this side- by- side. In these events, we do not have an expenditure with a percentage on the revenue. This is a commission, this commercial revenue. Most are people that is spent 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. Beyond this, we had a drop in prices. Talking about expenses, of course, we had an R&D&I, as Henrique Monteiro mentioned. It 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 market development. We reduced all this effort so we would not have an uncertainty in the market, both for our producers and the industry, and also as the producer itself.
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 risks that I can sometimes put a product that they will deliver more, but if it does not rain, we know that there are no miracles. Even though we have great technologies in the market, both about the seeds, nutrition, or whatever, nothing will resist a lack of rain. 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. As this is the idea, we believe in the market, things may turn, but we cannot destructure the company. We have a comfortable financial situation to keep our project.
Excellent. Thank you. This was 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. It's possible to imagine that in biologicals, beyond the drop in prices, we are going to see the drop in margins in 2024. Is that it?
Pedro Fonseca, we do not work for this. But within what we have been feeling, mainly because we are, almost in the last quarter of the year, the end of the first quarter of the year, 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 was 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&D.
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.
Thank you, Wilson Frizzo. It was very clear. Thank you.
Our next question comes from Mr. Gabriel Barra, a sell-side analyst from Citi.
Thank you. I have two, three 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 you hope for going forward?
What does the margin scenario of the sector? Perhaps the last two, three 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 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. The last one, just to finalize, 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 Wilson 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 2024. Your observation is a fact. I think that in the previous years, we had interesting margins, and this year there is a drop. Vittia works to have a margin that satisfies it. This is the main point. Of course, internally, you have mechanisms that are worked on for this. Vittia, possibly this year, will have 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 an structural issue. But what 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 three months, we are going to see, if you ask what's the light at the end of the tunnel, 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? We cannot know. So we cannot sell a fantasy to you. But what I can tell you is that we are working with a reality that we have the current expertise to seek a better result. Well, I believe in work. Work wins it all. Crisis as the ones we're going through, I have seen many, and we need to understand this moment. We need to work through it. 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&D&I, 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. The company's work never ends. When we speak about this, I think Frizzo can enlighten more. We are looking at the opportunities every single time that we know they are there. Nothing that Frizzo later may speak better on this, about the repurchase and M&A.
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. It is natural that later when the environment comes to normality, for us to have a recovery in our margins. When will this happen? It is as Wilson said, we cannot say.
We have a scenario that is challenging for 2024. 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 wider margin products which will propel these technologies in our markets. 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.
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. Then, as Wilson said, we are bringing new technologies. This margin, we had a gaining margin going up 20%, but if we take the history of the company, speaking basically of how long I have been in Vittia, we had no margins of EBITDA that is much lower than 2023. 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. We also have our daily work of seeking differentiation, because products that are commoditized will only lose margins.
Talking about our allocation of capital, I think that we have been happy, let us say, in the sense that we have awaited 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 good opportunities for shareholders through our 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 a repurchase.
It's natural. We have these opportunities that we are always looking at what is the better and when the scenario changes, 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. We are constantly monitoring and work on these two fronts. Repurchase and M&A, and eventually even the organic investments. Of course, even in this scenario that we do not have our demand so strong in this, for now, they are still not in our radar.
Okay, thank you.
Our next question comes from Larissa Pérez, a sellside analyst from Itaú BBA.
Hello. Can you hear me well?
Yes.
Thank you. Good morning. 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. 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 may perhaps absorb a little bit of this impact, how is this issue with the sector in general?
Frizzo, I think you could answer this.
Okay. To be honest, we are not hoping for a non-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. It's that issue in a market, in the way that we are living in, pressured by prices, with retracted demand, the industry will not be able to have this power of passing the prices. I do not see 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. This is how legislation works. The governments increase taxes and takes our competitivity and makes us have to work more in other ways to compensate this. That's it. 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 taxations within the company, and we need to understand that this does not interfere in our EBIT, 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 do not see a way to transfer this, because this is cost, these are taxes.
Okay, thank you.
I don't know if you want to complement, Wilson, on the other part. She was asking on costs.
Yes, if at a certain moment in the past you have already worked on this, if you can see something similar. I think you are better, Wilson, because I only have 10 years, you have 30 in the market, so you have more experience. The only thing I can say about cost is that 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. These are our actions, and as I said, as for the cost, when we have a demanding market, we make adjustments. We have more people, more marketing.
But if we are seeing, well, you visit a grain 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 destructure the company because these things come back. To reduce a lot our costs, we would have to, I don't know, let's take some regional, some structure from Vittia that we created 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.
If you look at the last 20 years where great crisis happened, in average, it was like a year. Few crises spent for more than two years, but we cannot know how long this current crisis will last. Crisis 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, 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 two tips, revenue and expense, which was very noticeable in the allocations of resources.
But we see, like Frizzo said, 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. In this shortest term, things will come, but 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 destructure 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.
Thank you.
Our next question comes from William Salum. Regarding ICMS, how much do you estimate that will be the percentage impact in the net margin? Is there some way to diminish this impact? Thank you.
I do not know if it is ICMS, actually, for the social contribution that we ended up answering. 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. 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 or products, but this is not a fixed rule.
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. That is why it does not have this fixed percentage throughout the year. Perhaps we will need to use 2023 as a base around 20% on the taxable profit with the rest for benefits.
Our next one is from Gustavo Coutinho Araujo. How are the expansion plans of Vittia? Do you want to open new CDs in the short term? What is the expectation of breakdown between the three selling channels?
Well, being very direct, we are not planning any CD for 2024. We opened two last year. It has been interesting in this moment where producers are not doing a lot of planning and are following what is necessary. When they need, we have a rapid response term, but we are also within that philosophy of not increasing costs for 2024. 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 non-payment. 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 a reduction with their 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.
Hello. Thank you for the opportunity. I would like to make question first for the requests 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 folio fertilizer, it can be in the biological market, this type of strategy. Thank you.
Well, we are living 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.
What we have seen in previous years, mainly when there was 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 within 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 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 products for producers, obviously, we will not only speak about biological or fertilizers. We will 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 pro-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 crops and new putting differentiated products, various technologies, and with that, we are increasing the cross-sell of the company.
Thank you. Thiago, do you have any other question? Perhaps you could go to the end.
A last question. Good morning. If you could mention on the debt contract with the BNDES and the issue of waiver, how are the negotiations with BNDES if in these first months there was an advance in this sense?
We have been talking with the BNDES. We have this, 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 the BNDES gave us that we would go for a prepayment. It's much more about adequately pacing our request and them having their time and fulfilling with the demands. 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 Botucatu waivers that ends up having a very different dynamic. 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 up surpassing the threshold that we have in the contract. It is important to say that from the last year, this limit is worth only if we have a leverage above 3x on the net debts 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.
From next year, if we have a leverage below 3x , we can distribute as much as we want. Our objective is to distribute. We had APA up to 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 Icoa. Good morning. Two questions. How are you following the RJs that are happening in the agribusiness? 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? Thank you.
Well, let me just say about the issue we have 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 30th- May 30th, which we believe that this may be the point for us to know what is the problem that we will have regarding the 2023, 2024 harvest. Our view is that we will not have something that intense. We have these adjustments, but we do not see this as something systemic.
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. In the scenario that we are of some RJs and programs, without a doubt, we are going to have a charter portfolio above average. This is good.
Both of our portfolio and our leverage is one of the issues that we are ready to leave this moment of adjustments more strengthened. Even connecting with what I said, we did not need to end with any regional, to end any city 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 will need to work on its structure to reduce it, and when the market comes back, it will not be as prepared. This is a little bit of our view. That is it. If you want to complement.
Well, regularly, you are 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 clearer for you, we will have a great thermometer, as he said, from April 30th- May 30th, but I think that the most critical moment has already gone through. We know that some people do have prolonged their RJs, will try to hold on their grains to have liquidity. Everything that we had already connected to the tradings which was already delivered. This is a positive view, and that's it.
The government itself is connected to the RJs. The Minister of Agriculture passed a notice 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. The world, unfortunately, does not have a clear behavior to being truly honest. There are some people that use these moments 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 William Salum. Could you explain the on-farm dynamic and how do you see this?
Well, I will be direct. We do not believe in 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 of more than 100,000 acres, and it was very profitable. Two issues. For this company, it's clear that substituting chemicals by biologicals is more than certain. And on-farming is, do not 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 days counted, being very direct.
Recently, we had a researcher, the one that most understands on biological microorganisms. She did a collection of the on-farm industries of the properties, and the sole thing that she did not find was the microorganisms that the person wanted to increase, and she talks about it openly within the press itself, that actually producers can be generating great pathogens for their crop and even for human health.
So Vittia thinks that this had some companies that tell this story, let's say, used this moment of the frailty in the legislation and sold 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 truly 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 renowned producer in Brazil, Inácio, that created Farroupilha. He had the desire of biological products, had an interesting assistance, and actually he built a company that was the Laboratório Farroupilha that later was acquired by Lallemand. So we are skeptical to this. There's an interesting issue. The prices of biologicals are going down.
It is very clear for producers that it is much more interesting to have within their crop quality products that will effectively solve the problems of plagues and diseases than 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 is 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. I think that what I wanted to make clear for all is that this is what agribusiness is. It is amazing. It is dynamic, so you have moments of escalades 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 of our company and so on.
I am 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 will not 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 Investor Relations is ready to answer further questions. We thank you for the participation and have a good day.