Earnings Call: Q2 2020

Aug 26, 2020

Hi, everyone. My name is Cristiano Veloso. I'm the Founder and CEO of Verde Agritech Plc. Thanks a lot for attending our presentation today. I will ask the ones who aren't talking to you put the microphone on mute, please. And before we begin with the presentation, where Felipe will be giving a summary of the financial information, the financial results. And after that, I will be answering questions at the end. If you want to send any questions, please use the option Q and A at the bottom of your screen, and we will read your questions and answer or try to answer them at the end of the presentation. I hope you're all very safe and healthy. I hope all your family and friends are equally healthy and safe. Unfortunately, in Brazil, the crisis has hit several families. As you might know, we've had over 100,000 deaths in the country and the number of deaths carry on increasing. Just yesterday, we had another 1200 deaths in the country. So before we begin, as we did also in the last quarter presentation, I will ask everyone to hold a minute of silence to everyone who lost, to everyone who was impacted or who knows someone who was impacted by the crisis either through health situation or through some of the stark economic consequences, unemployment, business failures, which were also some very, very sad consequences of the current crisis. So we will now be holding a minute of silence for that reason. Okay. We will now begin the presentation. So Felipe Paulucci, our CFO, will share his screen, so he can take you through the presentation. Again, if you have any question, just write it down on the Q and A option of the screen and we will answer those questions at the end. Filipe, I think this disclaimer, if you go to the disclaimer, the next slide. Okay. So the disclaimer, I will give you a few seconds to read it. A few years ago, I added a line to this disclaimer, which is if you are risk averse, don't buy our stock, don't rely on anything in this presentation. It's pretty much a summary. This has consistently been on every single presentation we've put out over the last few years. So now that you've had time to read the rest of our disclaimer, I will let Filipe start his presentation. Thank you, Filipe. The floor is yours. Filipe, you're on mute. Thank you, Cristiano. Thank you, everyone, for joining the meeting. I'm Filipe Paolucci, CFO of the company. So now I will pass to the results of Q2 and comparisons against the prior period and other information that we consider as relevant for everyone to know. So any doubt and questions, please feel free to use the Q and A to ask for us. So at the end of the presentation, we're going to be able to answer. So starting here in the agenda, we have the highlights, then the Q2 and the key financial statements, a bit of operation summary, then I go through SG and A expenses, some other highlights, also the financial summary, Brazilian economic scenario, key metrics and development and exploration information. So we're going to have all these subjects during this the next probably 30 minutes, that's the time that I expect to present to you. Chart number 4, we have the highlights. What I'd like to say on this chart and explain a bit. 1st, about cash, we do have a credit facility now and of over EUR 21,800,000 approved by 3 financial institutions in Brazil that we can use whenever we want or we need, anticipating clients' invoices, for example, and then bring this cash into the company. At this point, we do not have any of it being used. In July 2020, the company secured a bank loan of BRL5.3 million that we're going to use for capital expenditure and also for investment in other things in the factory and such as, for example, working capital if needed. Profitability. The revenue increased by 87% compared to 2019. Production increased by 139% and sales over 2 0 2 percent compared to the same period of last year. We have details and numbers and the other information ahead in this presentation. About net growth, we reported in Q2 $444,000 compared to a net loss last year of $223,000 Also, gross margin has increased by 12%, that delivering 62% in Q2 2020 compared to 50% last year. About operation, we do and still work in the ISO 9,001,000 and 14,001 implementation, which is underway. We have consultants supporting us on it, and we do expect certification for 1st semester of 2021. The second point in operations, it's important to say that we're always focused and improving safety for our workforce. So health, safety, environmental comes first for us. It's mandatory. And also related to the factory operation, we bought a new mill last 60 days that replaced the first one that we bought in 2018, which increased our capacity of 14% tons, delivering a total operational capacity of 2,000 tons per day. So we would be able without selling any inventory and just what we produced to sell over 60,000 per month. In the right side of this chart, we just highlighted here that we do expect to remain with the same targets as we did before of BRL 32,000,000 of revenue, representing over 76% growth. And also just to highlight as well that our seasonality, the peak is now in September October. So the next 2 months are the biggest one for sharing volume and sales for the company, as we already expected before due to the agricultural cycle. And the last thing, the right side of the summary, just very, very important to say that we expect to consistent growth, delivering technology products and new products. So we do expect in the coming days, weeks new products and of course, that's going to support our split scale for the next periods. The last point on this chart here, just very important to highlight the exchange rate yields this year. Brazilian real is 3.6% against 2.88% last period. So it's a drop in Brazilian real over 25% this year. Moving on to financial statements. I would like to highlight some points here. For example, revenue, we delivered 2.4 $92,000,000 in this quarter versus against $1,300,000 in Q2 2019, which is over 88% growth. And year on year at half 1 year to date from January to June, over 100% growth. Important to say that, of course, the production costs increased because there is total expenses. We're going to see in the next chart the cost per tonne. And the gross profit total gross profit of the company also increased 130 percent in the quarter and now 122 percent in the semester. Sales and general administrative expenses also I have a specific chart to explain it, why we are increasing, spending more money to support the growth, but I will talk a bit about it in the chart number 6. And then what's good to highlight here, I'd like to say it's going to the net profit loss. We come from a net loss of EUR 2.23 billion to a net gain of EUR 4.44 billion. Also half 1 against half twenty twenty against half one twenty nineteen, we do show a loss what was projected already in our 2020 budget. In the operational summary, in the next chart, number 6, we can see the volume, the growth of 202% in the quarter and over 2 30%. So it's a massive growth in volume for the same factory. Revenue per ton sold, we did loss 38% on this, but mainly due to the potassium chloride price that decreased from last year to this year. We have a chart also to show this impact in our revenue per ton. Production cost per tonne, we decreased from $28 to $0.13 Here is mainly due to two factors, two reasons. 1 is due to volume increase, what dilutes fixed cost. And the second one is due to also some improvements that we've made last year, end of last year and Q1 this year that supported us to reduce cost per ton. And later on, the gross margin here of 62% versus 50% last year. Moving to sales and general administrative expenses. We do have increased a significant increase of total 34% on SG and A, mainly due to 2 expenses. 1st, sales and marketing expenses that we have over 25 sales and marketing professionals that we hired to support our growth. And of course, it's going to still impact us in the coming quarters since most of the people we hired during the Q1 of this year. So I expect to carry this 25 people additional cost for the next 2 or 3 quarters. And then also good to highlight here the distribution expenses. Last year, we did not sell basically CIF, cost, insurance and freight, but most of the sales used to be FOB, free on board, which means that we did not have freight in our expenses. And now we do have and we are selling CIF. The total this year of CIF against FOB, we had around 6% to 7% of the sales in the 1st semesters 1st semester 2020 on CIF. We have also charts that I will take a bit more chart number 8 here. Just a comparison of the numbers I just said on SG and A in the left side, the first chart, highlighting here the sales and marketing expenses and distribution expenses, which are the biggest ones. And we can see here that we are spending more, but it makes total sense since we are preparing the company for higher growth in the coming periods. And this, of course, makes us to hire more people. And then the CIF, as I mentioned before, that increased our distribution expenses this year. Then the second one, the tons sold. The tons sold, you can see here the huge growth we had in the period out in the Q2 and also in the 1st semester cumulative, showing a total growth of over 2 29%. And then in the 3rd chart, just to highlight the gross margin increase from 50% to 62% and from 52% to 57%. Of course, the distribution revenue impacts this. But if you remove distribution revenue from the top line, we still have an increase in gross margin on 1st semester of over 3%, so which means that we more than mitigate the loss in the revenue with the cost improvement of our margin even in distribution expenses. Chart number 9, we do have the bank loans and borrowings that we have currently in the company. It was also presented in the MD and A, but now here included the ones that we took now in June sorry, in July. So it was after Q2 closing. As I mentioned before, the Bradesco 1 of BRL5 1,000,000 and BRL 359,000 for the acquisition of the new mill. So here are our other loans that we currently have in the company, when they should be repayable by and total interest payable per year. So as you can see, most of the debts are long term. So we do not have risks on cash flow and yield values to be paid in the coming months. A bit on financial summary. So the company recognized a revenue of $2,500,000 87% compared growth compared to last year. Revenue per ton, we had a loss on it, as I mentioned before, because the product price is based in the potassium chloride price. And also this decrease from 335 to 230 based in the Aseeto Limited report, made our revenue per ton decrease a lot, but it was more than mitigated by volume increase. And also, as we are growing and then we also sold a bit more further from the plant, which made our price per ton decrease a bit since the freight impacts more our revenue. SG and A expenses, so an increase of 30%, mainly due to the 25 sales and marketing professionals, as I've mentioned before. And also distribution expenses increased, CIF against FOP higher volume in this year. Profitability. Sales increased 202%. Operational profit increased $670,000 and gross profit increased by $867,000 And the last point, gross margin increased 12% to 62% against 50% Q2 2019. A bit on cash, net cash generated from operating activities improved $600,000 mainly due to the operational props delivered. Investment activities decreased $300,000 compared to last year. And this was mainly due to investments made in the factory we had last 2nd semester of last year, prior period, sorry, 1st semester. The company had $600,000 cash on hand in the end of the quarter and over $1,700,000 on receivables that could be anticipated if we needed. However, since we did not, it is still in our accounts receivable from customers. And the forecast still shows a June position of CAD 2,800,000 around BRL 8,700,000 in cash in the period, in the end of Q2 2021. Some charts to show the scenario, the economic scenario. I don't know if everyone is aware, but Brazilian real devaluated a lot, over 30%. You can see in the first chart here that currently we have an exchange rate and the U. S. Dollar per Brazilian real of over 5.40. And this is impacting our business, as I mentioned before, on costs, reducing costs per ton. However, the chloride price decreased in U. S. Dollar. This more than compensated. And the federal interest rate, we are now at the lowest value ever in Brazil. We are with 2% on interest rate, mainly due to the COVID crisis, as everyone knows, to try to stimulate the numbers and the GDP. The government reduced the interest rate to attract more investment to the economy. Now the charting the potassium chloride price and a decrease of 34% in U. S. Dollar from January last year to July this year. So this impacts us directly because we must decrease the same to our customers since our price is based on the chloride potash chloride price. On volume tons and revenue, on volumes, you can see now a bit different from what I showed before 2018, 2019, 2020. So we can see 1st Q1 and Q2, we did not have volumes in 2018. So this chart will be more will be better to compare once we have Q3 closed. So we're going to be able to compare here in Q3 the 3 years. But it's clear showing that volume, for example, in 2020 is getting close to June. Of course, Q3, you cannot report yet, but until June, we are getting close to what we had full year before. And revenue, in the same situation, we are showing here significant growth in every quarter and we do expect to remain as is. The next chart, number 15, we have the sales volume quarter per quarter. But good and different to show here is the year on year growth. Can see the percentage of growth that we had in the quarter, 2019 versus 2018, the volume growth of 20 20 versus 2019. And then what's good to highlight again is that our sales volume expect for 2020 remains similar to what we had estimated last end of 2019 of 222,000 tons and with revenue over BRL 32,000,000. Currently, until today, 2 days ago, our market cap was $34,700,000 with outstanding shares over close to 47,000,000 shares. And total funds raised since IPO totaling 65,000,000 dollars On permitting status, we've shared with everyone a press release last week that we have granted on August 2019 the 233,000 tonnes per year approved in Mine P21, which was a great news for us. And since as you can see, the other 3 ones in 2020, they were already published, but we can see it better in the next section how we are prepared for even next year, for example. So we do have on mine pit 1 rented and already, let's say, ready to be mined 233,000 tons. In mine pit 2, we have already approved 150,000 and on Mine P3 close to 50,000, total of 432,000 tons that can be mined last next year already. So this is the information up to date up to the last information we had that was last year last week about the 233,000 tons. So this question was the key information I'd like to share with everyone. And we are here to seek questions and answers. And well, I'm passing back to you. Thanks for everyone joining and attending the meeting. Thanks a lot, Felipe. That was very good. We've received 2 questions so far on the Q and A. Some people sent me some questions on WhatsApp as well, and I hope there will be more questions coming up as we start answering some of those questions. The first question comes from England, from George, and George is asking the credit facility interest rate is a bit more than 12%, which seems quite high. Is this a typical Brazilian rate? And is there still access to cheaper government funding? George said that question on that very first slide, where we show how much funds we have available on a rolling basis and the 12% isn't high. That's typical for a company of our size and for a company with our credit score. So that's a market rate. And the other question is, and is there still access to cheaper government funding? The answer to that question is yes, there is. We carry on working on those alternatives. And usually, that type of access is in connection to CapEx investment. It's in connection to innovation, and we carry on working on those alternatives as well. If I didn't answer any of your questions fully, just carry on sending more questions here on the Q and A, and I'll go back to to whichever point wasn't properly addressed. The other question by Ricardo Miranda, how much do you plan to spend in CapEx this year and next year? Or are you building a new industrial plant? My suggestion is that for the next quarterly results, we do present a breakdown of CapEx invested so far this year and CapEx budgeted for the last quarter, and we adopt that practice going forward. So we can be updating that on a forward going basis. And then to the second part of the question, whether we are building a new industrial plant, the answer is no. We're not building it yet, but we are completing the project, the planning and everything which is required for you to start construction. We're also waiting for an environmental license for 2,500,000 tons, which we've applied to in terms of ore, which would be important to support this new industrial plant. I hope that for the next quarterly results, we can provide more details on our expansion plan, which we hope would initiate early next year in terms of breaking ground to build a new plant. Next question, Gillian, she asks what determines the price of potassium chloride in Brazil? Is the price still declining? So what determines the price of potassium chloride in Brazil is a negotiation between Brazilian importers and the Brazilian importers are the big blenders in Brazil. The big blenders in Brazil are companies like Yara, the Norwegian company Mosaic, the American company Herringer, which is a Brazilian company, Ferturbach, which is another Brazilian company, Ferti Deserci Tokanci, which is now a Russian controlled fertilizer distribution company. So it's the negotiation between those parties, which are big fertilizer importers and the vendors, the global vendors and traders of potassium chloride, which is also very concentrated. You have in North America, Kenpotex, which sells all the potassium coming from both Nutrien and Mosaic. And you have in the Russian side, you have Rokkali and you have Belovskali BDC, which they're also traders. And together, those 2 groups or 3 groups, they control about 80% of potassium supply. The other players you have in this market are much smaller. So you have ICL, the Israeli group, you have K plus S, which is the German group, you have SQM, which is the Chilean, but they are usually price takers or price followers. Usually, the price is determined between the big guys. Jeff answering a very asking a very important question here. Why did you replace your mill after only a few years? The reason we replaced the mill after only a few years was because the mill we bought back in 2018, when we bought it, it was the biggest mill available in Brazil. And last year, a new mill, a one with bigger capacity was launched. So it made economic sense to get rid of the first one we had bought and replace it with another one with a greater production capacity. The one we got rid of, we managed to sell it. So to give you an idea of our selling skills, if fertilizers don't work out, you might start selling secondhand equipment. So we bought the equipment for BRL 257,000 BRL 257,000 and we sold it for BRL 160,000 after using it for 2 years. If you look at U. S. Dollars price, we probably had some small profit there. In the new mill we bought, which has a greater production capacity, its cost is BRL 320,000. The capacity here, Jeff says that the capacity wasn't too much bigger either. Yes, it wasn't that much bigger. It was only about 15% bigger. But if you do a business case like we did, you see that the payback even if we hadn't managed to sell the mill for a good price, the payback comes very fast by just making this switch because you can just replace mills and you carry on with the rest of the facility as it is, conveyor belts, everything else. So it made a lot of sense. Another question here. It's asking what are the new generation technologies in advanced stage of development referred to on Page 4. I'm very excited about that. As you all know, a few years ago, we seized to be a potash company and we became a technology company when we switched from Verde Potash into Verde Agritech. And since then, we've been working very hard on new technologies applied to our mineral. And there's a lot of very exciting development. And I hope to very soon be making the specific announcement on our first new technology to be rolled out. And that will deserve for sure a presentation on its own right, on its own merit, which I think we're getting very close when we could do that. Next question from Montreal, Julian. He's asking, please explain in details your growth strategy, local market versus international and the projected numbers for the next 3 years. Yes, so our growth strategy for the local market, which is our focus, is to 1, carry on with a strengthening of the relationship with the more than 600 customers we already have. On that basis alone, we can significantly increase sales because a lot of those customers, we don't sell to 100% of their property yet. In addition to that, we will continue with our aggressive market development execution plan by accessing different farmers, opinion makers, consultants, professors, presenting the product, presenting the benefits, carrying on trials, doing that trying to do that in a very cost efficient way as we've been successful so far in doing when you compare what we've achieved versus what other companies usually have to spend in terms of market development to achieve similar results. So that would be our growth strategy. In terms of international markets, our strategy is to strengthen relationship with the distributors we currently have, both in North America and in Asia and to support them in terms of market development. There's no plan to establish a proper presence or a company's presence there. It should do that through partners and let them develop the market. It's very exciting, the international market. I get lots of questions about that. I get lots of ideas from excited shareholders, which we obviously share. And I personally was the one who picked up the phone and called our 1st distributor and closed the 1st sale. So it's like preaching to the priest about the international market. However, we do need to focus and the focus for the company in terms of market development is on the Brazilian market. Projected numbers for the next 3 years, Julian, I'm not going to give you projected numbers for the next 3 years, I don't know. We will carry on doing our best. The pre feasibility study has some scenarios there, which one can use, but I don't know. We will most certainly carry on doing our best to keep growing as fast as possible, not because we not only because we like it, but because we believe we need to. We need to carry on growing as fast as we can. And one book I read on the topic, which I learned a lot from is blitzscaling. I think anyone reading this book will probably agree it's an excellent book written by one of the cofounders of LinkedIn. Blitzscaling helps one understand why for a company in the stage we are right now, it's so important to carry on. A question coming all the way from California from John. Thanks, John. So how much super greensand have you shipped through North America during H1 compared to H1 of 2019? I don't know from the top of my head, but whichever number it was, it's not material that I can guarantee you in comparison to our overall numbers. What is your cost to deliver SGS to North America and what is the price North America distributors pay for the super green sand? Some numbers here, John, we won't be disclosing public. One, because it's truly not material for our business, but 2, because they are based on negotiations we have with the distributors. And so this isn't information we will be disclosing at this point. Ian is asking, is turnover of BRL 32,000,000 realistic with a devalued real and sales at $35 a tonne, yes, it's very realistic. We have a very excited and committed team in Brazil working very hard to make this a reality and deliver on this target we established for ourselves in October last year. And as I said on the last press release, I remain very confident we will be able to deliver on the BRL 32,000,000 target? Maxwell is asking price dependent on PKL, I presume you mean KCL. Price dependent on KCL, will they ever separate based on quality? That's a very good question. The short answer is I don't know. Certainly, we hope it will separate. We certainly hope that as over the years, farmers start to witness all the benefits you get by replacing potassium salt with our product, the additional nutrients, also the benefits to the environment, the benefits to the soil, I hope people will start paying more for our products. Another question from California. What is the current installed capacity for K40? So the current installed capacity for the plant is 2,000 tons per day. That's how much we can process with the current plant. Another question by Ian. Have you disposed of the 2018 mill that has been replaced or is it also capable of production? It was sold, as I said. It's no longer ours. And if we want a new one, it's better to buy the one with better capacity, reduces operating cost. And by buying the new equipment as well, we get some very favorable terms in terms of funding it. Another question by from Montreal. You seem to have a new product called Alpha. Can you tell us more about your updates line of products? Julien, Alfen is a product we press released a few years ago. It's essentially the same as super green sand or Calforte, but it's ground extremely fine. So it's broken down into nanoscale and that product is used for crop protection. So you spray it to crops rather than applying it to fields. It's a product we haven't we have it for sale in Brazil. The product name in Brazil is CelisioForte. It is something which is selling. We are making money out of it. We have good margins out of CelisioForte, but it's not something we have been focusing on in terms of marketing and sales efforts. The focus has been on K40. Focus, focus, focus, there is a very good for those of you who are big fan of Steve Jobs, there's a very good video on YouTube. If Isabella can find it and share it on the chat, it's when Sir John Ives, the Chief Designer, is being interviewed and asked about Steve Jobs and he talks about Steve's unique capacity to focus. So you think about the company with the cash file Apple had with a sort of brainpower Apple had, the number of genes working there and their main challenge was really to make sure they would pick and focus on a few things rather than trying to do too much. So we recognize we are definitely not in the same league as those guys and absolutely not as smart as they are. So we definitely try to not to do too much stuff at the same time. And the focus has really been Brazil, Forte and of course, we evaluate, we assess the alternatives, we develop, we're innovative company, we're technology firms, so we're always looking for other alternatives, but it will only be when the time is right and the team is prepared and the structure is prepared and all the procedures are in place that we will start bringing something else. Next question from London. What percentage of Q2 sales were repeat customers? And what percentage were new clients? Is there a trend developing? It's a very good question. As some of you know, we did an awful job last year in terms of reaching out to the clients who had bought the previous year, and we lost some sales because of that. This year, we are not repeating the mistake. This year, we have procedures in place, which were allowing us to be very effective in that regard, very effective in establishing those relationships. And I will be disclosing when we have a full year, I will be talking to the Board and I hope to be disclosing, let's say, with Q4 results, what was the number of repeat orders, repeat customers, and we will try to provide some data here, which I understand why it's important, why some investors want to see that. Another question from Max. What's best for investors, Canadian dollars versus Brazil ratio? So I'm not sure if I understood the question correctly, Max. If not, just repeat the question somehow at the bottom. But what's best will always be a weak Brazilian currency because that's great for farmers. So the weaker the Brazilian currency, the best it is for farmers that make more money out of it. And of course, we will be reducing our costs as well as a consequence of that. Question all the way from Norway. Are you planning listing on any other exchange? Personally, I believe that it doesn't get the attention it's worth on the TSX. If so, how long have you come in with those plans? We're not planning anything at the moment, but we have heard from several investors that perhaps TSX is not the best exchange for a company like ours, growing, delivering on cash flow, big potential and we will most certainly, once we can focus on something else, explore the validity of those arguments and the merit about potentially looking for a different exchange if this is indeed the case. But there isn't a plan at the moment. Another question by Ian. You talk about a new generation of technologies currently under advanced development. Can you elaborate? I surely could. It's something I'm very excited about, and it's something so exciting that deserves a presentation on its own merit. It would be unfair, show the hard work, show the accomplishments, show everything we've been doing if we use this Q2 result presentation to talk about it. So I hope very soon to be scheduling a specific presentation for that. Another question, is there any way to smooth your sales throughout the year? Will they always be seasonal? And the short answer is yes. Unfortunately, they will always be seasonal. Very unlikely, we can find a way to smooth them throughout the year because it's dependent on weather. That's the driver. That's the driver for the seasonality of our business. When it's raining a lot throughout the rainy season, that's not when farmers apply fertilizers, that's not when they take delivery. So it will always be seasonal. We've added to the newsletter a chart, which shows the different months, the different seasons. I hope you all can look at it. Randy is asking what are the sales trends with repeat customers? Do the vast majority of old customers buy again? Or are they increasing their order size? So yes, we have plenty of repeat customers. Yes, the majority of old customers buy again. And yes, they will increase their order size. As I said, I hope to provide hard number for the next when we have our year end results. Another question, million, production for 2021 looks as though it has to come from 3 different pits. Are they closed? Does this give logistical issues? Yes, they are closed. It's not a major logistical issue, but we do hope and that is thinking about the plant number 2, thinking about the next plant, we do hope that for next year, we would have the additional 2,500,000 tonnes license. John Randall asks, I would like to know how difficult is it of late to expect more license approval from Brazilian authorities promptly and what is a reasonable expectation of time to get your next license approval from them. So the answer to the first part of the question is that the regulatory process in Brazil has improved a lot since I begun the business about 15 years ago. The new regulation or the current regulation is much clear nowadays, and we have seen license being issued significantly faster throughout this new regulatory umbrella. So if you look at the license, which was issued just recently last week, that was one license, which was applied all the way back in 2016, I think, and took all those years to be approved and issued. The other license we had issued took significantly less time to be issued because they were done under a different regulatory framework. One problem, which especially the mining agents faces in Brazil is the lack of personnel or fortunes. They aren't enough hands on deck to do the job. And even though there's plenty of goodwill and there's plenty of political will and just there's a literally a lack of hands. There's been some great improvement in terms of process. For example, until not long ago, all those process were paper based. So sometimes, it would take anything from 2 to 3 months for one process to move from one place to another place and states go to Brasilia. Nowadays, it's all digital. It's all electronic. So that alone starts saving time. But then you start creating some other holdups because of a lack of hands. When we expect the next license approval? John, this is something I gave up trying to answer a few years ago. Those of you who have known me for a longer period, no, I do not and will not give you a date on when any of those license will or might be issued. Another question, is the potassium chloride price in Brazil still declining? No, no. The price is no longer declining. With the turmoil in Belarus, there has been discussions about vendors trying to push a $10 to $20 price increase on potash. Terrence is asking real trend lines seems to be more slippage already down by a significant amount. I don't know what Terrence is talking about here, sorry. If you could elaborate a little bit further down, I will go back to your real, the Brazilian hell seems to be yes, okay, okay. So the currencies have been already down by a significant amount. So if you're talking about the Brazilian currency, yes, it's devaluating, although some very large banks, including very large international banks are coming up with recommendation for investors to buy the Brazilian currency as an investment. And if you ask my opinion, if my opinion is worth anything, I think it's oversold. I think there is and economists and the Big Mac, the famous Big Mac Index seems to agree with that, that the currency in Brazil is not properly valued at the moment. Another question from London. So the question is, do you see the fall in global KCL prices as just a temporary COVID related demand change? Or has there been an increase in global KCL supply? Do you see the fall in price reversing? So starting with the last question, I don't see the fall in price reversing. I think potassium chloride prices will stay this low, bouncing back from between $200 $2.80 thereabouts for the foreseeable future. The reason I believe that will be the case is because there is a very large project called Jensen owned by BHP and none of the big suppliers want that project to be built. BHP was supposed to make a decision again this year, but it was postponed for next year. And that project has most certainly kept a lead on anyone's intention to build a conventional potassium chloride project. For those of you who are watching us on YouTube or are here with us live and aren't very familiar with potassium chloride projects and mines, it's an aculean undertaking. So pretty much 95%, 90% of every potash mine built in the world was built by authoritarian government. So it was built by the Brazilian military government back in the 70s, where there wasn't much expectation in terms of economic results. They were built by Communist Russia, again, back in the 70s. And like some Canadians like Jamaica Joke, was equally built by Communist Saskatchewan back in the 70s. A handful of potassium chloride mines were built recently, including Teiplus S, which was in Canada, including a couple of potassium mines in Russia, built by EuroChem and of course, ours. The reason for that is those mines, they take up a lot of capital investment. So conventional potash mine will cost you anything from $3,000,000,000 to $8,000,000,000 And it's not just the CapEx, it's the time it takes you to build and to ramp up it to production. So from the time you start breaking ground to build it to when you fully ramp up, you're looking at close to 10 years. From the time you start building it, when you start taking potassium chloride out of the ground, you're looking at anything from 4 to 5 years. So projects with crazy construction timeframes and complicated to see built. So if you ask me if I think BHP will build Janssen, I don't think they will. I don't think they will. And the other question, which probably would need to come up here, does this matter to Verde? And the short answer is, it matters very little. I mean, we you can see from the presentation we have on our website, we are unbeatable in Brazil in terms of the delivery cost, and it matters very little. I mean, with the current depressed potash prices, we already have very juicy margins. Some might call it obscene margins. And I don't think we need to it's not something I would lose sleep over. Another question by Terence. Opportunities or problems, markets versus operations with respect of real? Sorry, Terence, please elaborate a little bit further. Thanks, Jeff. Another question from Terence. I did not hear how the market conditions, moisture, soil depletion, etcetera, or in Brazil, go into winter season and spring expectations. In terms of general agriculture, if that's his question, it couldn't be better. Brazilian farmers are making truckloads of money given the high price of the commodities, The price of imports have been at historical low prices, which they're very happy with in terms of soil, moisture, weather has also been very positive favorable throughout most of the country. Another question from California. So how far ahead of delivery do you contract with farmers the price of K40? Since KCL price is artificially depressed this year because of COVID, we might expect a rebound next year. What is the risk that farmers will want to nail down this year's price for next year? It's a good question, John. We have had some farmers already buying and asking to buy a product for delivery next year. There is a it's common for farmers, especially from Mato Grosso, Mato Grosso do Sul State to purchase fertilizers at the end of this year for the following year. So that's a common practice. And answering the last part of the question, what's the risk that farmers will want to nail down this year's price for next year? I mean, I don't see that as a risk because I don't even know if potassium chloride prices depressed this year because of COVID. I don't think it is. I don't think COVID has played any role in the dynamics of potassium chloride. But hey, who am I really to analyze that? What you have an opinion on that? What I would say is that, yes, every farmer who wants to buy our product for next year, we're selling. We are selling at the current this year's price. Another question from lovely Montreal. Can you explain what happens during the rainy season? Stockpiled before, no mining, no sales. Okay. So during the rainy season, farmers, they will either go to the beach, to the islands, to the nice properties on the coast, in the mountains and we'll carry on looking at the how much it's been raining. Not much happens in terms of farming. We get very busy beforehand, but once it's raining, it's there's little they can do. Answering your question, Julian, about Verde, we don't do the same. We actually that's when we can do most of our planning, that's when we can review our process and that's when we can try to intensify the relationship with those customers. And that's equally when we do try to make some forward sales. Every year, we do that. In terms of operations, the mine shuts down in Brazil for the rainy season. It's not I mean, there's no point really because your demand drops down significantly. What we do is to build a small stock of ore at the plant and reprocess that small stock as and as if needed. Another question by Terrence, Nutrien is pretty high-tech, digitized, lots of computer know how for market applications and spec products. How do you compete with them in Brazil? That's a good question. Good question. So Terence is absolutely correct. Agriculture is a tech business. It's startups everywhere from sensors to robots doing everything and it's very exciting. And Nutrien, as Terence points out, they have some interesting tools and especially because of Agrium, they have a big retail presence and they've been doing a lot in that front, especially in North America. In Brazil, Nutrien is only now starting to crawl. They've made a 2 or 3 acquisitions. They have been starting to try to set some of this stuff up and there's no doubt they will push very hard on this digitization. How we compete with them and others in Brazil is by essentially doing what every modern company, what very aggressive company, what every start up company is doing in terms of outbound marketing, the inbound market, in terms of trying to understand in detail what are the pains of the customers and how we can cost efficiently resolve them. And I won't go into more detail about what we're doing because that might I think, again, the answer to your question will be our full presentation with new technology. And some of you might have seen, I was invited to present at the biggest agri tech conference a few months ago. And yes, we are positioning ourselves to be either ahead of most or at least in line with the ones winning the race. John, another question by John Kaiser. What percentage of this year's orders represent repeat orders from existing customers? A big chunk. We will have a detailed breakdown on our Q4 results if the Board allows me to do so. Randy, please describe your overall sales funnel. Good question, Randy. We do think like that in terms of funnel, we use sales force and everything else. Which crops are your best markets. We I won't get into detail, of course, I can't about what our funnel, our sales funnel looks like at the moment, but it's good. And which crops are your best markets? I would say coffee is something which our market penetration has been growing very fast. Grains in general, soybeans, corns, there's consistent growth, sugarcane, and we are going to start pushing more with forestry eucalyptus. It's a very big pulp and paper industry in Brazil, and it's something we are making interesting progress. Thomas is asking what is the percentage penetration with existing customers? Still small, Thomas, still small and there's still a lot of room to grow. Ian, if the exchange rate is 2.9, that's over 300,000 tons, unless I have got the maths wrong. I don't know your maths, but I can guarantee you we are in good shape to get you 32,000,000 tons sorry, 32,000,000 BRL 32,000,000 of sales this year. Question all the way from Israel, Adi. From your perspective, Cristiano, can you share if farmers are continuing to reorder and do they increase their orders? Yes, they continue to reorder and a bunch of them have been increasing significantly. George is asking, you have 2 tons a day of processing capacity, but what is that capacity a year given the rainy season? So George, we as a full production, you should always consider from April towards the end of October. Those would be the months we would be aiming to be producing at full capacity because that coincides with the months where there is delivery, there is interest of farmers getting taking delivery of product. Another question, if sales are seasonal and you're currently producing at 2,000 tonnes per day, do you stockpile during the winter months? Yes. We have 2 sheds where we stock the product in bulk and we try to stock as much product in totes, big bags, 1 ton totes as well. Another question from Israel. Does corona had any detrimental effect on the business? Demand side, farmers or supply side operations of Verde, 0, 0 detrimental effect. And that's why, Eddy, at the beginning of this presentation, I wanted to hold that 1 minute silent because, yes, we're celebrating, we're growing, we're making money. Future looks very promising, but we acknowledge how many families have been tragically impacted by the crisis. John, he's asking what is the Brazilian inflation rate and what is the inflation rate for your production costs? Brazilian inflation rate at the moment, I don't know, but it would be, I don't know, Felipe, do you know what the can you check? I mean, just if Isabela could check the inflation rate and share on the chat, What's the inflation rate for your production costs? I can't give you a rate. Yes, it's Philippe here. The 2020 inflation, we do expect no more than 2%. We have even months with deflation scenario at this year. So 2% is a good number for this year and next year projection. It's around 3%, let's say. And our production cost inflation, we can say that salary of people, it's 100% driven by inflation normally, not 100%, but close to it. And also but we do have volume increase and other improvements that for sure made our cost in Brazilian reals decrease year on year. So I do not expect any inflation at all on cost in Brazilian reais this year. Thank you, Felipe. You can see John, you've been following us for several years. You can see now with Felipe how much better we are. Another question by John. What is the potential for Brazil's existing KCL supply capacity to be expanded? There's one operating mine the Northeast of Brazil owned by Mosaic, and it's a Highlander mine because it's always it's living forever because right when we begun in 2,008, people saying that the mine was going to shut down in the next 2 years and somehow they keep finding a way to bring out more potash from it. One thing for sure, the production there is decreasing and the production there is very small. It's about 400,000 tons, I think, at the moment, 300,000 tons, it varies. And then you have 2 potential projects, 1 in the Northeast, close to that mine owned by Vale. It's a project that when KCAL price was high, there was a junior company that tried to develop. But as I understand that, the economics didn't work even at the very high prices back then. For those of you who are new to the potash space, prices did go as high as $1200 per tonne back in 2008. They did hover around $500, dollars 600 for several years before Lukashenko, the Belarusian President, decided to arrest the CEO of Urokali, who went to Minsk to complain about BPC selling potash out of their cartel. And then they had the fallout and prices started coming down. This happened back in 2013 when our price or share price equally started tanking. There's another mine, which is in the Amazon jungle, and it's a complex project. People have been talking about that project for several years. You have the problem of existing like when you mine potash, half of it is potash when you take it out of the ground and but normal half like it's usually 20% potash and 80% table salt, sodium chloride, NaCl. And when you are in cold countries like Russia or Canada, that NaCl, some of it ends up on your road and some of it goes into ponds, but you're dealing with a much different climate to a tropical jungle. When they started trying to develop that project, they talked about dropping, dumping the salt into the Amazon river. That idea was dismissed relatively fast. And then since then, people have been they've been talking about backfilling the mine with that salt. It's something, as far as I understand, that has never been done before. And in spite of that, there has never been a potassium chloride mine build in a jungle, very wet situation, condition, tropical climate on the equator. It's very complicated mines. To give you an idea, for those of you who like to read about black swans, Nassim Taleb, the ones who read The Economist a couple of weeks after there was the COVID pandemic announced by the World Health Organization, they came up with the other potential black swans out there, all the way from magnetic thunderstorms to other crazy possibilities. One thing that is in my humble view as a potential black swan event is the possibility of sinkholes taking place where you have those big potassium chloride mine operations, both in Canada and Russia. It was a sinkhole back in 2,008, which came out of the blue unannounced That was a big mine owned by a company at the time called Souvenit, Souvenite, which was then taken over by Urokali. And that big sinkhole was the reason potash prices went from $200 up to $1200 for a few months and allowed it to stay pretty high for the following years. So it's very complicated mines and I also remember talking to someone who used to operate those mines in Saskatchewan and how he would have nightmares and he would wake up in the middle of the night dreaming about the flood rates in those mines. So they control very carefully flood rates because they can also be a big operational problem and what the nightmare is. So it isn't an easy open cost mine to operate. And when you think about the jungle, even if you leave aside any political discussions about the Indian tribes in the region or any of that, just look at from an engineering perspective, it's a complicated project. Stephen Baker, Chris, tough question to answer. You guys can see, I start reading the questions even before knowing what it is. So I hope no one sent anything offensive here, which might end up being read live. And I thank everyone for sending so many questions and participating. So Stephen has asked, quick tough question, true answer. But why hasn't one of the big producers tried to buy Verde? With our low stock price and low number of outstanding shares, it seems like Verde would be a target. My answer to you, Stefan, is that none of those big producers truly believe on what we can do. I don't think any of them think we can carry on building the market and become any sort of problem or I don't think they I think that's the short answer. And the reason I don't think they believe is, well, 1, the product we sell is a powder, powdered product. It's not a granulated product. And in North America, the market for powdered product isn't existed. So every time they understand it's a powdered product, they don't give much credibility. The other point, which in their shoes would justify a lack of credit on what we're doing is the fact, hey, no one has ever done that. No one has ever really tried to develop a big meaningful potash market with a potassium silicate. This is unheard of. It's the first. It might how can that work? And it's not your conventional source of potash. And from an agronomic point of view, what they would say is that potassium chloride is highly water soluble. Plants need water soluble nutrients to be able to uptake. We don't even believe plants can uptake the nutrients from your product. This is a potassium silicate. So how come it would be available? So for all those reasons, they don't believe us. That's it, Stephen. Good job, isn't it? They don't believe us. Another question from Israel. Farmers or incredibly conservative bunch? I agree. Comparing what you see today, demand by farmers, to what you thought couple of years ago, how hard does it convince new farmers to transition from conventional potash to Verde products. They are very conservative, but they are as smart as they are conservative. The generational farmers or the group of farmers we're talking about in Brazil, they were small farmers, most of them, who came from the 7 states of Brazil back in the 70s and believed on the dream of 1 man. The man with a dream was our director, Ari Sanpaolelli. And this man's dream was that all that barren land, all that land which has no usage of whatsoever for agriculture known as Serrado, all of that land can turn into agricultural land, can turn into productive land if you follow this new science. Alessandro Nelik equally came up with as well as all the government programs backed by the military government in Brazil at the time when he was made Minister of Agriculture in his early 30s. So all of those farmers who then left and went on, they became not just truly successful, but equally wealthy with the development of Cerado, with the development and growth of the interest from China in importing soybeans and corn from Brazil. And that taught them an important lesson, which yes, it's important to be conservative, but it's equally essential to innovate. Innovate or die. And the ones who stayed back behind in Paradise State, in Rio Grande do Sul State, they are nowhere as as successful as their cousins and relatives and friends who decided to develop this new world. And nowadays, you have several billionaires and farmers farming 1,000,000 acres and an endless number of successful stories of hard work and innovation. Another question from Israel. I note your shareholder survey. Can you elaborate your thoughts? What was the area? What are you trying to serve, Remedy? Very good question. Thanksgiving. It gives me an opportunity to talk about that. I believe Isabella has shared on the chat option the link to the survey for the ones who haven't participated on it. I will be reading in detail everything and answering your question. The reason was after 15 years since I raised or 16 years or 17 years since I raised money for the first time and started dealing with other people's money and of course started trying to convince people to buy stock, convert it, to become shareholders, I learned a lot. And one of the biggest lessons was that it's impossible for you to please everyone. People are very different. They have different purpose, different objectives, different intentions, different risk tolerance, different motivations in life or psychologically different. And I think my biggest mistake was should be just like thinking all this time, everyone because I love the company so much, I was working so hard to build it, to think that everyone should be a part of it, everyone should be buying shares of the company as well and join us for the ride. What I learned is that for some people, it's better if they don't join the ride. For some people, we just won't be able to place them. There isn't an alignment between what we are doing and how we are doing and how we're going to carry on doing things and the purpose which drives us and what they want. Some people want dividends as soon as possible. Some people don't care about saving the world and people don't know what impact investing or ESG is. Some people, they want to be fortune traders. Some people, they think Brazil is Switzerland or some people think the Beltway, we just we have a commodity to sell and it's just easy to sell. And so there's different people. And what I will come up with on the back of that survey and on the back of our discussions, and I've had discussions with some shareholders as well as the Board with that, is going to be a list, which we will essentially say, sorry, we are not good enough for you as a shareholder if you are, and then I will start with bullet points. If you are this, if you are that, if you are like this, if you are like that. And then there will be another slide in our presentation, which will say, if you are and then there will be the list below, join us because it will make sense to you. So we're really trying what I'm really trying to do is to avoid frustration. I'm really trying to let people be as happy with their lives and with their investment as they possibly can, and we're going to be as upfront as we possibly can be with what we are, how we are, how we operate and what we will be doing in the coming years. Another question. So what impact, if any, does U. S.-China conflict has on Verde? I think there was an impact in terms of China starting to buy more soybeans from Brazil rather than from the U. S. But other than that, I didn't see any other major impact. But again, I'm not the smartest person, Adi, and probably someone else might be able to elaborate further on that or share something I can't see with my limitations. Karl Heinz, you talk about new Technic in the Q2, can you talk sorry, Karl, I didn't say any question. You talk about new Technic in Q2, can you talk are you talking if you're talking about the new products, it's something I mentioned deserves a dedicated presentation for that. And that was the last question. Let me see if anyone sent a question on chat as well. So those were the questions, every single one of the questions without any censoring, which came up on the Q and A option. I'm going to have a quick look on the chat option. So on the chat option, I think you guys can see a message from Isabella about a feedback form, which I would strongly appreciate if you could answer it. It will take you 30 seconds to do and will help us improving as ever. Then there's a message from her talking about our newsletter. Please update. Some people have had our newsletter going into the spam box. So if you could also have a look to see if any of our emails ended up there, you can click to accept to receive it, so it doesn't go to spam anymore. Our YouTube channel, we now have a YouTube channel, which is in English. I hope you all can go and subscribe to it. Click on the alert button, so you see every time there's a new update. We've lots of investors had asked us to translate some of the videos in Portuguese. So we did that and they were available on this channel. There is also a very important video there. I would strongly recommend everyone of you to go and watch it. It's a couple of minutes, which explains our purpose to improve everyone's health and the health of the planet. So that video goes into detail explaining why and how we do that. There's another message from Isabelle again about the feedback. Then there's Terrence talking about Real Impact or planning to sell Francois is asking if we're planning sell K40 on Amazon like we did before. Yes, there is a shipment on its way to Amazon. It was troubling to get it there because of COVID. The rates that were being quoted were crazy high. We also messed up because we essentially run out of packaging for Amazon. So there also was a reason for further delay, but we hope it will soon be restarted on Amazon. There's a question here, which was already answered. So I can see Isabela shared the video here from John Ive and Steve Jobs. Another question from Farmers, which was answered. Can you speak to the survey recently? And then Terry asking again for me to talk about the survey. How is the privacy of the investor protected? And what's the intended use of the information. So you can I believe you should be able to answer that anonymously, if you so wish? And the intended usage of that information I've shared, which is for us really to understand how aligned we are as management with the other fellow shareholders. So that concludes the interactive bit of our presentation, whereby we've answered 46 questions from the Q and A and another couple here from the chat. If anyone has any further question, now is the time. If not, I will tell you all. I have no words to describe what a great pleasure it is to be the CEO of Verde. We have been building a team in the company, which is phenomenal, extraordinarily motivated with COVID or since COVID begun, we've hired about 20 new people or thereabouts. And one thing we did was to hire all of them to work home office. So we've broken the walls or the boundaries of just working in an office, and we've been able to bring some extraordinary talent from all over Brazil. And now we have employees in over 15 different cities all over Brazil who have been paramount on everything we've achieved so far and will be essential as the company continues to grow. It's also something I'm extraordinarily excited about the quality of the people we've been hiring and the strength of this team we've been creating in the last few months. So with no there's no further question. So I'd like to thank you for having joined us for all this time. I appreciate the time and the fact so many of you decided to share questions. I thank you if you had the interest to watch our presentation on YouTube and if it was interesting enough for you to make its way all the way down to the end of the presentation. And as ever, if any one of you wants to reach out and talk to us and ask questions and make suggestions, it's not just our job, it's not just my job, but it's a great, great satisfaction. I always learn a lot from every interaction I have with all the shareholders, all the parties interested in the company. So thanks a lot. I hope you all stay safe, you and the family, and I look forward to talking to you again very soon. Thank you. Bye bye.