Barclays NTR@CN Lavoro Ltd. Planting The Seed in Brazil Initiating Wit

Equity Research
Americas Agribusiness
5 December 2023
Lavoro Ltd.
Planting the Seed in Brazil: Initiating

CORE
with an Equal Weight
We initiate coverage of LatAm agricultural input retailer Lavoro LVRO EQUAL WEIGHT
(LVRO) with an EW rating and US$7 price target, given short from Not Rated
Americas Agribusiness NEUTRAL

term Brazil risks. Additionally, we provide a breakdown of the Unchanged
Brazilian crop input market and find that the best route to Price Target USD 7.00
market is to develop and provide ag-tech to medium to small from N/A
Price (01-Dec-23) USD 6.60

farmers. Potential Upside/Downside +6.1%
Although we are structurally positive on Brazil - where the company holds a leading ~10% Americas Agribusiness
market share in the ag retail space, the industry is facing short term destocking issues, which Benjamin M. Theurer
are expected to remain an overhang at least until 2CQ24. On the positive side, LVRO's high- +52 55 5241 3322
margin Crop Care sales should provide decent growth; this segment involves LVRO's companies benjamin.theurer@barclays.com
that produce and import private label products such as off-patent crop protection, biologicals, BCCB, Mexico
and specialty fertilizers. Specialties represented ~9% of 4FQ23 input revenue - up 300 bps YoY - Rahi Parikh
(excl bartering which was mid single digit percent of total revenues) while Crop Care more than +1 212 526 0150
doubled its share of consolidated adj. EBITDA YoY to 19% fiscal 2023. rahi.parikh@barclays.com
BCI, US
Key risks and opportunities: As a company that has mainly grown through M&A, we see risks
Ryan Lavin
from dilutive transactions, increased amortization, high Brazilian interest rates on financing +1 212 526 8713
costs, and delays on expected synergies/integration. M&A contribution to top and bottom lines ryan.lavin1@barclays.com
also blur true operational success. Adverse weather can disrupt planting seasons and acreage BCI, US
count - both key inputs to LVRO's revenue. Other key risks include inflation, unfavorable
Reid Monahan
legislation, and failure of product adoption. On the flip side, a faster resolution of the +1 212 526 7506
destocking overhang, increased demand for ag inputs and a better M&A pipeline offer upside reid.monahan@barclays.com
potential. Equally, we believe its current share price is negatively impacted from low trading BCI, US
liquidity, which if improved would result in a re-rating of its shares.
Additionally, we analyze the opportunities and challenges in the Brazilian Agricultural market
and explore what could be a smart way to invest in the space. We believe the winners in
Brazil's growing Ag industry would be those who provide tech solutions to the medium/
smaller companies to help them achieve higher growth through better yields, rather than
by land expansion. For retailers however, given the industry landscape, the most realistic path
is likely M&A with seed and/or crop protection companies. A new entrant solely focused on
fertilizer/nutrient sales (for ag and industrial/animal feed use) would be in a less advantageous
position, as these products are highly commoditized and would compete on lower input costs
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
This research report has been prepared in whole or in part by equity research analysts based
outside the US who are not registered/qualified as research analysts with FINRA.
Please see analyst certifications and important disclosures beginning on page 35.
Completed: 04-Dec-23, 21:39 GMT Released: 05-Dec-23, 05:10 GMT Restricted - External
Barclays | Lavoro Ltd.
(transportation/logistics foundation), which makes less economic sense, given the relatively
poor infrastructure in Brazil.
Highlights and Lowlights of the industry: Brazil's high growth potential in terms of land and
dollar-value ag output makes the region a clear focus in coming years. However, its highly
fragmented Ag space – with 14,000 operators serving growers– and low-quality infrastructure
remain issues to overcome. We have also seen a spike in global ag-input overstock in the last
two years which is likely to continue into 2024 - including countries within APAC, EU, North
America, and South America; the most lasting effects to date are in Brazil, but this should
hopefully ease as the main growing season approaches. As more ag input companies adapt to
inventory levels in the channel and within retail locations, this overstocking trend should
become less frequent; although we expect this to take a few years to perfect.
Potential implications for companies within our coverage: CF Industries, Corteva, ICL,
Lavoro, Mosaic, and Nutrien all have exposure to Brazil. Technology-focused newcomers would
likely benefit CTVA the most; as farmers have better accessibility and allocate more capital
towards technology, we believe they would be more motivated to play higher-quality seeds -
one of CTVA's main product lines. The impacts to CF and MOS could go either way, as the use of
tech tools may indicate more or less nutrient needs. LVRO and NTR could see neutral
to negative impacts from new technology, as the same reasons could increase or decrease
farmer utilization of Crop Protection and fertilizers. On the potential risks, NTR's digital tool and
LVRO's ag tech offerings may not be able to compete with pure-play digital solutions. We do
note that LVRO is already targeting small to medium farmers and increasing access to basic soil
testing and more advanced predictive technology, as we prescribe in one aspect of our main
strategy; with the company's leading ag retail share in Brazil, we would assume that LVRO would
be any tech-focused entrant's largest competitor. Although we think both LVRO and NTR could
partner with new entrants, LVRO is more likely to do so as NTR is building in-house capabilities.
We do not expect any newcomers as such to enter the Brazil market for at least the near term
given the region's current destocking issues.
5 December 2023 2
CONTENTS
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Lavoro at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Advantages of Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Challenges to overcome in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Game plan: How to be successful in Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Lavoro Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5 December 2023 3
LVRO: Quarterly and Annual EPS (BRL)
2023 2024 2025 Change y/y

FY Jun Actual Old New Cons Old New Cons 2024 2025
Q1 N/A N/A -0.75E N/A N/A 0.82E N/A N/A 209%
Q2 N/A N/A 0.85E N/A N/A 1.50E N/A N/A 76%
Q3 -3.36A N/A 1.56E N/A N/A 0.55E N/A 146% -65%
Q4 -0.72A N/A -2.14E N/A N/A -1.73E N/A N/A 19%
Year -2.26A N/A -0.47E N/A N/A 1.13E N/A 79% 340%
P/E N/A N/A 28.5
Consensus numbers are from Bloomberg received on 01-Dec-2023; 13:50 GMT
Source: Barclays Research
5 December 2023 4
Americas Agribusiness NEUTRAL
Lavoro Ltd. (LVRO) EQUAL WEIGHT
Income statement (BRLmn) 2023A 2024E 2025E 2026E CAGR Price (01-Dec-2023) USD 6.60
Revenue 9,347 10,465 11,529 12,461 10.1% Price Target USD 7.00
Gross profit 1,731 2,099 2,383 2,669 15.5% Why EQUAL WEIGHT?
EBITDA 394 733 984 1,167 43.6% LVRO is Brazil’s largest agricultural
EBIT 227 549 783 948 61.1% input retailer and a leading provider
Pre-tax income -391 -58 181 351 N/A of agriculture biological inputs.
Net income -261 -55 131 221 N/A While LVRO has a solid footprint and
EPS (reported) (BRL) -2.26 -0.47 1.13 1.92 N/A high level of expertise, current
Diluted shares (mn) 115 115 115 115 0.0% inventory overhang in the ag retail
DPS (BRL) 0.02 0.00 0.00 0.00 -100.0% channels in Brazil result in our
Equal Weight rating.
Margin and return data 2023A 2024E 2025E 2026E Average
Gross margin (%) 18.5 20.1 20.7 21.4 20.2 Upside case USD 10.00
EBITDA margin (%) 4.2 7.0 8.5 9.4 7.3 A faster destocking and more
EBIT margin (%) 2.4 5.2 6.8 7.6 5.5 normalized demand patterns, drive
Pre-tax margin (%) -4.2 -0.6 1.6 2.8 -0.1 margin upside potential in the short
Net margin (%) 119.2 90.0 90.0 90.0 97.3 term. Additionally, given its M&A
ROIC (%) 5.1 18.7 31.8 40.0 23.9 track record, any larger value add
ROA (%) -3.9 -0.7 1.6 2.7 -0.1 acquisition can drive incremental
upside.
ROE (%) -13.8 -2.6 6.2 9.6 -0.2
Balance sheet and cash flow (BRLmn) 2023A 2024E 2025E 2026E CAGR Downside case USD 5.00
Cash and equivalents 564 321 302 439 -8.0% After weak results in FY23, and given
Accounts receivable 2,667 2,930 3,170 3,365 8.1% lasting inventory destocking risk, if
Inventories 1,868 2,052 2,243 2,402 8.7% farmers were to slower come back
to normal purchase patterns, cash
Total assets 7,524 7,720 8,118 8,585 4.5%
flow in the short term could be
Short and long-term debt 1,150 1,149 1,134 1,132 -0.5%
negatively impacted.
Other long-term liabilities 71 71 71 71 0.0%
Total liabilities 5,414 5,671 5,923 6,144 4.3% Upside/Downside scenarios
Shareholders' equity 1,860 1,805 1,936 2,158 5.1%
Net debt/(funds) 586 828 832 693 5.8%
NOPAT 399 546 747 842 28.3%
Dep'n & amortisation -167 -184 -201 -219 N/A
Change in working capital 718 194 168 134 -42.8%
Cash flow from operations 108 -72 176 329 44.9%
Capital expenditure -65 -70 -80 -90 N/A
Free cash flow 43 -142 96 239 77.5%
Valuation & leverage metrics 2023A 2024E 2025E 2026E Average
P/E (reported) (x) N/A N/A 28.6 16.8 22.7
EV/sales (x) 0.5 0.5 0.4 0.4 0.4
EV/EBITDA (x) 11.6 6.6 4.9 4.0 6.8
EV/EBIT (x) 20.1 8.7 6.2 5.0 10.0
FCF yield (%) 0.9 -3.0 2.0 5.1 1.3
Dividend yield (%) 0.1 0.0 0.0 0.0 0.0
P/BV (x) 1.8 1.8 1.7 1.5 1.7
Total debt/capital (%) 35.3 35.9 34.1 31.7 34.2
Net debt/EBITDA (x) 1.5 1.1 0.8 0.6 1.0
Interest cover (x) 0.2 0.9 1.3 1.6 1.0
Note: FY End Jun
Source: Company data, Bloomberg, Barclays Research
5 December 2023 5
Executive Summary
Initiating Coverage with an EW rating and a $7 Price Target
Lavoro (NASDAQ: LVRO) is Brazil’s largest agricultural input retailer and a
leading provider of agriculture biological inputs. The company distributes key
agricultural inputs such as seeds, fertilizers, crop protection, and other specialties to
its network of farmers. It also provides personalized recommendations, agronomic
services, financial services, and bulk inventory storage. The company has operated
exclusively in Brazil, where it holds a leading ~10% market share in the ag retail
space; but has begun to move into other Latin American countries such as Colombia
and Uruguay, and plans to enter Chile, Paraguay, and Peru. It currently does business
in 11 Brazilian States and 30 Colombian States, serving 72k customers. Along with
the traditional distribution segment, Lavoro has started to develop and sell its own
private-label products including biologics and specialty fertilizers under the
Essenziale name. These products will be sold through Lavoro and other ag retail
channels, with an easy entry point given the company’s vast farmer network. It also
launched an online platform, CompreLavoro, and an app, Minha Lavoro, to allow for
additional points of contacts with farmers. M&A is currently the main driver of
growth, as the company has made over 20 acquisitions in the last five years. Long-
term, the company looks to become the best agricultural input distribution company
in Latin America through the consolidation of the market and a unique value
proposition for its farmers.
Investment Thesis
Lavoro is a well established ag retail operator in Brazil, with a growing business in
LatAm. We believe the company is well positioned to further consolidate the industry
and drive ag input usage improvements in the region. Although, current industry
conditions are still unfavorable and coupled with a relatively low trading liquidity of
its shares we stay on the side lines for now.
Long-Term Trend + Upside

Besides the structurally positive view that we have on Brazil Ag and the
advantage LVRO has from its leading market share, the company's Crop Care sales
should provide decent growth. This segment involves Lavoro’s companies that
produce and import their own portfolio of private label products such as off-patent
crop protection, biologicals, and specialty fertilizers. As do other players, LVRO
expects biologicals to build relevancy in that they are needed to address BZ's low
crop rotations and three annual crop cycles -- all the while minimizing environmental
toxins and chemical use vs traditional agrochemicals. This drives bottom line, as this
cluster holds higher margins compared to LVRO's traditional ag input products.
Specialties represented ~9% input revenue in 4FQ23 (up 300 bps YoY) and we expect
this to expand. Additionally, Crop Care more than doubled its share of consolidated
adj EBITDA YoY from 8% to 19% in fiscal 2023.
Short-Term Risks and Opportunities

This current phase of Brazil's destocking is likely to continue until mid-2024; LVRO
management confirms that it expects the BZ retail ag inputs market to see overall
decline of ~20% for its fiscal year 2024, driven by pricing headwinds. We see this as
the major risk in the near term. FX will also adversely impact results for the near
term, given its EM currency exposure. Pricing has normalized over the last year as
well, as prices overshot in ’21-’22 from temporary factors such as the COVID-led plant
5 December 2023 6
shutdowns on Chinese agrochemical production and the start of the Ukraine Russia
conflict. Overcoming this in a timely manner as opposed to other players would be
LVRO's main opportunity.
Valuation Methodology and Price Target (Upside and Downside)

We derive our LVRO Price Target using a DCF approach. Our WACC of 18% is derived
from a 25%/75% debt/capital structure, with a Kd of 12% and a Ke of 20%. We use
BRL reported results to derive the present value of future cash flows. To derive our
US$ price target we apply the current BRL/USD Fx rate of 4.90 and apply a 25%
"liquidity discount" given the low level of LVRO trading liquidity. Our US$ price target
is $7.00.
Our Upside case assumes faster destocking and more normalized demand patterns,
to result in margin upside potential in the short term. Additionally, given its M&A
track record, any larger value add acquisition can drive incremental upside.
In our downside case we see risks that after weak results in FY23 and ongoing
inventory destocking risk, if farmers were slower to return to normal purchase
patterns, cash flow in the short term could be negatively impacted.
Banking on Brazil Growth - how to be smart when going into

Brazil
We believe the smartest way to enter the fragmented Ag industry in Brazil is to
focus on robust technology offerings, as the nation will have to improve yield
over land expansion to take advantage of its prime growing environment. Such
technology includes advanced precision technology, satellite imaging, and better
yield-interpreting tools. These novel tools are already found in BZ but are more
accessible to larger farmers; we think a company focused on the smaller to medium
farmer market would be able to gather substantial revenues and profitability. As a
retailer, we believe the most realistic path is M&A. This is likely a long and costly
journey, as illustrated by NTR-- after spending ~$500mn on 15 retail acquisitions by
end 2022, it has gained only 3% share according to Bloomberg -- while Lavoro is a
leader at just 10% share. A new entrant solely focused on fertilizer/nutrient selling
company (for ag and industrial/animal feed use) would not be less well positioned,
as these products are commoditized, requiring a robust transportation/logistics
business to succeed on lower costs, which we think would be less economically
viable especially given the relatively poor infrastructure in BZ.
Major Opportunities and Challenges

On the positive side, we believe Brazil is set to play a key role in solving global food
deficiency challenges, as the nation 1) uses double and triple cropping, 2) is able to
expand arable land quicker then major ag countries, 3) lacks sophisticated ag
technology in certain planting regions and can therefore boost yields as newer tools
are more ubiquitous, and 4) has benefited from its weaker currency. On the other
hand, long term obstacles include inferior infrastructure and reliance on trucking in
Brazil, fragmentation, and commodity exposure due to the bartering
payment system. Destocking in fertilizers, crop protection, and seeds has been a
global issue with the latter two categories still seeing build up in Brazil; we
think some of this will most likely improve by 2Q24 and ag input companies are
investing now on building better tools to understand channel and retail inventories,
which should limit the frequency of overstocking. We nonetheless assume this will
most likely take years or decades to perfect.
5 December 2023 7
Potential impacts on our expanded coverage:

CF Industries, Corteva, ICL, LVRO, Mosaic, and Nutrien all have exposure to BZ. CF
primarily sells Nitrogen-based fertilizer, while CTVA focuses on its Crop Protection
and Seeds offering in the country. NTR has a more customer-focused business,
including retail locations, a digital application which offers tools for crop planning
and soil analysis with customized technical recommendations, and fertilizer/
seeds/CP for ag/industrial solutions. LVRO is a retailer, selling seeds, fertilizers, crop
protection, and other specialties while providing agronomic, financial, and storage
services. MOS also sells fertilizer but includes a distribution business, with the main
business as the latter. ICL is able to offset more risk through diversification, as its end
products in BZ are used within a multitude of industries, such as food, carbonated
drinks, asphalt modification, paints and coatings, etc. With the exception of LVRO,
these companies entered BZ mainly through M&A, though NTR is building out
a digital hub on its own.
As of late, Brazil operations have seen negative results, given deferred customer
purchases and retailers unloading excess inventory acquired at a higher price. We
saw substantial delays in fertilizer purchases in the last 1.5 years based on high
prices, weather, and inventory build-up, while now the focus is on crop inputs and
seed. For instance, CTVA saw Crop Protection demand pullback in May due to higher
inventories (most pronounced in Latin America, followed by North America) and
expects this buying pattern to persist for crop protection and seeds until at least
1H24, with indications of possible further weakness. As a result, we now believe
CTVA will reach its 2025 goals 1-2 years later.
For the BZ Ag retail space, we expect an increase in M&A activity or collaboration

as companies jostle for market share gains (though some such as NTR have put
further M&A plans on hold for now, no timeline given), which has implications for
companies under our coverage. Technology-focused newcomers would likely benefit
CTVA as more farmer investment in technology should influence high-quality seed
purchases. The impacts to CF, MOS, LVRO, and NTR could go either way, as the tech
tools may indicate an over- or under-application of fertilizer in fields and
could therefore impact customer demand. Also on potential risks, NTR's digital tools
and LVRO's ag tech offerings may not be able to compete with pure-play digital
solutions. We do note that LVRO is already targeting small to medium farmers; with
its leading ag retail share in Brazil, we would assume that LVRO would be a key
competitor to potential tech-focused entrants. We do not expect any newcomers in
the Brazilian market for at least the next year given destocking issues, but in the
future, this could be problematic for NTR unless digital tools are fully ingrained in
farmer practices by then. We could see both LVRO and NTR partner with new
entrants; however, LVRO is more likely to do so as NTR is building in-house
capabilities.
We think the most challenging space to enter would be the basic and industrial
(animal feed) nutrient/fertilizer products, "because crop nutrients are global
commodities available from numerous sources, crop nutrition companies compete
primarily on the basis of delivered price" as warned by Mosaic in its annual
report. This would imply that transportation and logistics will be key to win this
market, which is expensive to build out or even buy especially given the poor
infrastructure in Brazil.
5 December 2023 8
Lavoro at a Glance
São Paulo-based Lavoro is Brazil's largest agricultural inputs retailer having posted revenues
of ~R$9.3bn in fiscal FY23, with growing distribution operations in Brazil, Colombia, and
Uruguay. The company's target market is small and medium sized farmers ranging between 100
- 10,000 hectares (250-25,000 acres) as these are typically not serviced directly by ag input
producers. Historically, the company operated exclusively in Brazil, where it holds a leading
~10% market share; LVRO's target market typically reps 65% of cultivated land in this region. On
March 1st, 2023, the company became the first US-listed pure-play Latin American agricultural
inputs retailer on Nasdaq.
Company History
Lavoro was founded in 2017 following the merger and acquisition of more than 20 large and
medium-sized distribution companies, under the control of Patria Investment Funds, one of the
largest alternative investment managers focused on Latin America (now holding ~85% of LVRO).
The company was listed on NASDAQ on March 1st, 2023, following a SPAC merger with TPB
Acquisition Crop. Initially created as a distributor and retailer of agricultural inputs, the
company is now developing its own brands of private-label agrochemicals, foliar, and biological
fertilizers. M&A has been the primary form of growth in the first ~5 years of the company’s
history, driving Lavoro's market leadership in Brazil and growth within Colombia and Uruguay.
The company has made 20 M&A deals since 2018, with 1 more in progress with a binding
SPA signed. Looking ahead, there are also plans to expand operations into Chile, Paraguay, and
Peru.
FIGURE 1. Lavoro M&A Timeline
Source: Company Reports, Barclays Research
Listing Transaction Overview

As a result of the merger, Lavoro received US$ ~$134.4mn in gross proceeds, including the
contribution of $100mn that TPB had invested through a private placement at USD $10 per
share. Lavoro plans to allocate capital towards investment activities and growth initiatives,
such as 1) organic expansion of its retail footprint with new stores, 2) acquisitions of additional
agricultural retail and input companies, 3) introduction of new sustainable products and
technological services, 4) expansion of operations throughout Latin America1 .
Lock-Up Period
Currently, Patria Investments - a Latin American asset management firm - holds ~85% of Lavoro
shares due to a lock-up agreement reached in September of 2022. While 25% of these shares are
1
https://www.lavoroagro.com/en/sem-categoria-en/lavoro-and-tpb-acquisition-corporation-i-announce-completion-of-
business-combination/
5 December 2023 9
now available to be released as 180 days have elapsed since this date, many still remain
"locked-up". An additional 25% of shares can be "unlocked" at one year following the closing
date, with another 25% available at 18 months and two years, respectively.
Business Description
Lavoro is Brazil’s largest ag input retailer with a portfolio of leading brands in seeds, fertilizers,
pesticides, foliar fertilizers, biological inputs and other products for agriculture and livestock.
Main crops currently served include soy, corn, cotton, coffee, beans, rice, sugarcane, wheat,
citrus, and pastures. Today, the company works with the largest seed suppliers in Brazil and
aims expand operations with other types of seeds, such as wheat, millet, sorghum, pasture, and
other cover crops. It also provides personalized recommendations, agronomic services,
financial services, and bulk inventory storage using a specialized team for technical visits and
direct contact with customers.
The company consists of ~1,000 technical sales representatives (RTVs), which meet with more
than 72,000 customers on farms and at 215 retail locations multiple times a year to help plan,
purchase inputs, and manage farming operations. Holding ~10% market share in
Brazil, Lavoro is operational in 11 Brazilian states located in the Midwest (Mato Grosso,
Mato Grosso do Sul and Goiás), North (Tocantins and Rondônia), Southeast (São Paulo and
Minas Gerais) and South (Paraná, Santa Catarina and Rio Grande do Sul) regions. The company
is moving into other Latin American countries such as Colombia (few distributors, within 30
states) and Uruguay, and plans to enter Chile, Paraguay, and Peru. Along with the traditional
distribution segment, Lavoro has begun to develop and sell its own private-label products
including biologics and specialty fertilizers under the Essenziale name. These products will be
sold through Lavoro and other ag retail channels, with an easy entry point given the company’s
vast farmer network.
It also launched an online platform - CompreLavoro (May 2020)- and an app - Minha Lavoro (Dec
2021) - to allow for additional points of contacts with farmers. The latter provides access to
diversified products and services, credit status, consumption and order history, advance
payments, issuance of tickets, field monitoring reports, technical information, and product pre-
quoting and digital packing lists. Additionally, LVRO includes weather forecasts, dollar exchange
rates, grain values and news from the agro world for customers on the app.
M&A is currently the main driver of growth, as the company has made over 20 acquisitions in the
last five years. Long-term, the company aims to become a best in class agricultural input
distribution company in Latin America through the consolidation of the market and a unique
value proposition for its farmers.
The company has a broad geographic presence in Brazil and Colombia, and early stage
operations in Uruguay. Lavoro also plans to enter the Chilean and Peruvian markets through
the acquisition of NS Agro, which would make the company one of the largest distributors in
each respective country. However, in its 4FQ23 earnings call, management noted that the deal
has been indefinitely postponed due to a volatile Chilean peso and the current macro
environment in Brazil. On the upside, management remains in contact with NS Agro and intends
to revisit the deal as conditions evolve.
5 December 2023 10
FIGURE 2. Operating Regions FIGURE 3. Physical Store Breakdown

Colombia
Colombia, 39
Brazil
Peru
Paraguay
Chile Uruguay
Brazil, 181
Presence in Brazilian states
Current footprint in rest of LatAm
Near-term entry
Source: Company Reports, Barclays Research Source: Company Reports, Barclays Research
Segment Reporting
Lavoro follows a fiscal year calendar, which ends on June 30th, leading to 1HFY being July 1st –
December 31st, and 2HFY being January 1st – June 30th. Lavoro recently reported its 4FQ23
results for the period of April 1st - June 30th, 2023.
The company reports results in three business segments: 1) Brazil Ag Retail, 2) LatAm Ag Retail,
and 3) Crop Care.
FIGURE 4. Revenue Contribution per Segment FIGURE 5. Adj. EBITDA Contribution per Segment
Crop Care
Latam Ag 6% Crop Care,
Retail 18%
13%
Latam Ag
Retail, 11%
Brazil Ag
Retail, 71%
Brazil Ag
Retail
81%
FY23 FY23
Brazil Ag Retail
Lavoro’s Brazil segment consists of all of its operations dedicated to the distribution of ag inputs
such as seeds and fertilizers in Brazil. It operates in 11 Brazilian states, and currently consists of
30 group companies. This segment represented ~81% of total revenues by the end of FY23, not
accounting for adjustments or eliminations.
5 December 2023 11
FIGURE 6. Brazil & LatAm Sales by Region - FY23
Rest of LatAm, 16%
Brazil North, 31%
Brazil East, 27%
Brazil South, 26%
LatAm Ag Retail
Lavoro’s Latin American segment consists of all its operations dedicated to the distribution of
ag inputs such as seeds and fertilizers in the greater Latin America region. It operates primarily
in Colombia – with business in 30 states - and has an emergent input trading company in
Uruguay. Plans have also been announced to enter Peru, Chile, and Paraguay. The segment
consists of 10 group companies, and encompassed ~13% of total revenues by FY23, not
accounting for adjustments or eliminations. We also flag the low EBITDA contribution of the
segment, totaling only 11% of consolidated EBITDA - likely driven in part by FX headwinds.
Crop Care
The Crop Care segment includes Lavoro’s companies that produce and import its own portfolio
of private label products such as off-patent crop protection (Perterra product line), biologicals
(Agrobiológica), and specialty fertilizers (Union Agro). The company sees this segment as a main
growth driver, as biologicals are needed to address BZ's low crop rotations, two to three crop
cycles a year, and repetitive usage of the same crop protection products; this product category
will also be key in driving the green transition, as it minimizes environmental toxicity and
chemical use vs traditional agrochemicals while also maintaining efficacy. So far, the company
has seen significant growth in this product line, with biologicals up 80% YoY in 4FQ23 earnings
and the Crop Care segment expanding 94% YoY for FY23. This in turn drives the bottom line, as
this segment has higher margins compared to LVRO's traditional ag input
products because 1) these are differentiated goods and therefore are priced above the average
product, and 2) LVRO's vertical integration (where it produces these products in its owned
manufacturing sites) allows the company to capture the manufacturer and distribution margin.
5 December 2023 12
FIGURE 7. Crop Care Revenue (in US$mn) FIGURE 8. Crop Care Gross Margin
$250 50.0%
44.6%
$210.8 45.0%
$200 40.0% 36.3%
+93% YoY 35.0%
$150 30.0%
25.0%
$100 20.0%
$62.4 15.0%
$50 10.0%
5.0%
$0 0.0%
FY22 FY23 FY22 FY23
Crop care currently operates only in BZ with plans to expand in other geographies;
therefore, LVRO reports eliminations related to the sales between the Brazil Retail Ag segment
and Crop Care. This sector comprised ~6% of total revenues for FY23, not accounting for
adjustments or eliminations. By 2024, management expects this segment to account for 17%.
Additionally, we note that the segment has the highest profit margin, contributing 18% to the
company's EBITDA for FY23 compared to its minimal revenue contributions. Management
anticipates this trend to continue. As such, the scaling of the Crop Care segment is key for
Lavoro to boost its margins in the long-term.
Product Portfolio
Although Lavoro does not report specific financial results by product, it classifies its portfolio
into the following categories: 1) Crop Protection, 2) Fertilizer, 3) Seeds, and 4) Specialties.
FIGURE 9. Lavoro Sales by Product Type - FY23
Specialties, 8%
Seeds, 19%
Crop Protection,
49%
Fertilizer, 24%
Crop Protection
Crop Protection - Lavoro's largest portion of revenues - is a group of chemicals applied to crops
and soil to prevent damage during growth. Their three major categories of crop protection are:
1) insecticides, which reduce risk from pests and insects, 2) fungicides, which protect against
mold and fungi, and 3) herbicides, which prevent and eliminate weeds that can steal nutrients
and space from crops, which management states is about an equal split through the
company. Crop protection application varies year to year based on weather, crop type, and soil
conditions. Products are split into two categories - patented and generic. Companies will invest
5 December 2023 13
to develop new products, which they are then given exclusive rights to until the patent expires -
when they then become generic products able to be sold by any company. The Brazilian market
sees 73% of volumes sold made up of generic products while the overall market has grown at
CAGR of 22% from 2018-2022 and totalled ~R$115bn for FY22. As of the end of June 2023, Lavoro
expects the market to have reached R$166bn for crop year 2023. Key suppliers in the segment
include Bayer, BASF, and Corteva.
Fertilizer
Lavoro sells fertilizer in three major forms: 1) Nitrogen, which is applied as urea, 2) Phosphate,
applied as MAP, and 3) Potassium, applied as potash. These three products, collectively known
as NPK, can be applied individually or in a blend to improve crop growth and yield. Each crop
requires a unique blend of fertilizers and cyclical applications. The three largest fertilizer
companies in Brazil, by volume, are Yara, Mosaic, and Fertipar. NPK revenues have grown at a
CAGR of 20.6% from 2018-2022, reaching a market value of R$84.1bn in crop year 2022. For crop
year '23, the company projects a total market value of R$120bn. Key suppliers in the segment
include Mosaic, Yara, and Cibra.
Seeds
Lavoro offers a variety of seeds to its farmers, including soybeans, corn, cotton, sorghum,
wheat, and rice. Corn and soybeans, however, comprise a majority of seed sales. The company
notes that the two factors driving seed demand are planted area and technological
advancement. For corn, Brazil has seen the demand growth for winter corn double that of
summer corn, and for soybeans, farmers select soybeans based on potential yield, followed by
desired plant traits and adaptability to the field. GMO seeds make up a majority of Brazilian
cropland, sitting at 93% and 92% use for soybeans and corn, respectively. The Brazilian seed
market has grown at a CAGR of 18.4% from 2018-2022, now valued at ~R$21bn in FY22. LVRO
expects the market to total R$28bn for crop year 2023. Key suppliers include Monsoy and
Dekalb.
Specialties
The specialty product line contains a large group of smaller products that are meant to enhance
the crop-growing process. Products in this category include foliar fertilizer (applied to plant
leaves as opposed to the soil), adjuvants (improve crop protection effectiveness), and soil
correctives to chemically balance soil. The specialty products market has grown with a CAGR of
23.6% from 2018-2022 as farmers adopt these products to optimize their harvests in harsh
conditions. The market is expected to continue growth in 2023, reaching a value of R$51.4bn. As
of fiscal 4Q23, specialties accounted for 9% of Lavoro's input revenue (up 300 bps YoY) excl.
bartering sales. Key suppliers include Stoller (now owned by Corteva) and Agrichem.
Services
As mentioned, LVRO provides personalized recommendations, agronomic services, financial
services, and bulk inventory storage using a specialized team for technical visits and direct
contact with customers. In addition to the traditional Barter, the company developed
“Lavoro Valoriza”, a modality that guarantees special price conditions for farmers who work
with soybean. This program offers financial tools and easy access to the derivatives market,
such as stakes in upswing and downswing scenarios, in addition to the so-called “target”
operation, where, if the commodity reaches a certain price level, the transaction is
automatically dismembered and the gain is credited to the farmer.2 This also is an value-add for
LVRO, as it will be labeled not as a basic input provider, but a company with differentiated and
valuable services in the BZ agribusiness market.
2
https://www.lavoroagro.com/en/sem-categoria-en/lavoro-reached-the-mark-of-brl-1-billion-in-barter-contracts-last-
april/
5 December 2023 14
Partnerships
Along with its slew of M&A deals, Lavoro has entered into two key partnerships to further
improve its relationships and services for farmers. In October of 2022, the company signed a
multi-year partnership with Pattern Ag, a California-based predictive agricultural insights
company. The agreement will expand Lavoro's digital tools for its farmers, allowing them to
map fields, analyze ag data, leverage soil chemistry analysis, and provide specific
recommendations to optimize yield, costs, and environmental impact. Through this
partnership, the company will continue to build out its offerings outside of its traditional
products, making Lavoro a more complete provider of ag needs and services. The trial run of
this partnership has yielded positive results, and Lavoro intends to continue expansion of this
service. Pattern's holding company is The Production Board, the sponsor of Lavoro's
SPAC partner TPBA.
In May 2023, the company entered a long-term partnership with Brasilseg, an insurance
company and affiliate of the BB Seguros group. Lavoro will now offer Agricola Flex insurance in
stores and through field sales teams, covering soy, corn and wheat productivity. With rural
insurance payouts growing 47% YoY and collections increasing 39.5% YoY, the partnership
should expand LVRO's market share, grow its portfolio of financial services, and reach
additional partners throughout Brazil. Additionally, during the 4Q23 earnings call, the company
revealed a partnership with Stenon to provide nitrogen soil testing to customers. Longer-term,
management also discussed the idea of teaming with weather stations to allow for more
accurate forecasts for customers, helping them to optimize fertilizer use and planting time.
Seasonality
As an agriculture company, Lavoro is subject to seasonality based around growing seasons. As
such, Lavoro sees its demand peak from October - December (meaning 2FQ is usually the most
relevant quarter), with a second surge of demand from January - March. With this pattern sales
are highest during the spring season and working capital requirements peak just after the end
of the season. Due to the double peak in seasonality, inventory management becomes a
significant risk. In a normal year, 2FH EBITDA contribution is ~30% and last minute BZ buying is
~5-10% of demand.
Currently, due to significant levels of destocking in Brazil, Lavoro is facing irregular seasonality.
With farmers shifting to buying "just in time" instead of storing and stockpiling inventories in
fiscal 2024, the company now expects 40-50% of revenue to occur in 2FH24, indicating some
shift of demand from 2FQ to 3FQ24. For 1FH24, management expects a 20/80 EBITDA split
between first and second fiscal quarter, respectively. Last minute BZ buying should represent
20% of demand according to LVRO. We are also modeling a more normalized fiscal 2025.
ESG Overview
A member of the Brazil Global Compact Network, Lavoro has aligned itself with the UN's 2030
Sustainable Development Goals, zeroing in on the goals regarding zero hunger, decent work,
responsible consumption, and life on earth. The company has set individual goals for 2025, such
as no irregular deforestation, 100% customer traceability, safe and innovate product offerings,
and reduced greenhouse gas emissions from its operations. Notably, the company was awarded
the Mais Integridade Seal, a top ESG designation in Brazil, for the 21/22 season.
Environmental
Lavoro has placed a large focus on reducing waste generation and emissions, underscoring
internal recycling and reverse logistics, where LVRO partnered with the National Institute for
Processing Empty Packages (inpEV) to collect packages and prevent inadequate waste
management practices. Laovoro has also reduced plastic use by 91% and used 77% less trucks
for package deliveries.
5 December 2023 15
The company currently tracks three types of emissions and energy use. First, the company looks
to decrease its greenhouse gas (GHG) emissions. The largest emission source is the
consumption of fossil fuels in mobile combustion, which qualifies as Scope 1 - emissions from
transport vehicles owned by the company. The second largest contributor is electricity
consumption by Scope 2 operational units, and third is the refilling of fire extinguishers and air
conditioners on a yearly basis. While energy consumption and GHG emissions increased
exponentially YoY from FY21 to FY22, this reflects Lavoro's significant organic and inorganic
growth, which increased transportation (truck) needs. By 2025, the company looks to cut down
on its GHG emissions and have a more comprehensive plan regarding climate action. Some
plans to optimize emissions are already in place, such as incentivizing the use of renewable fuel
- which now accounts for 17% of volumes.
FIGURE 10. Lavoro Waste Generation (in tons) FIGURE 11. GHG Emissions (in tCO2, equivalent)
450 390.43 3,500.00
400
8.43
350 307.18 3,000.00
304.14
300 14.81 2,500.00
250 78.51 2,000.00
200 358.2 97.34
1,500.00
150 2,593.38
100 213.86 1,000.00
1,668.12
50 500.00
0 23.8
-
2020/21 2021/22 2020/21 2021/22
Reuse Recycling Incineration Total Scope 1 Scope 2
Additionally, Lavoro has started to embrace alternate forms of energy to improve its
environmental impact. In April 2022, the company launched a partnership with Sou Vagalume
to supply solar energy to operations in the state of Minas Gerais - 23 branches in total. Roughly
85% of the Minas Gerais operations' 22,000 kw/h per month power usage was provided by solar
power. After the success of this pilot program, two silos in Parana will also have energy
consumption supplied by solar power.
Social
As M&A continues, Lavoro must work to maintain a consistent culture among its growing
workforce. To move towards this goal, the company has established 6 training schools and 51
courses that look to engage employees on basic firm practices, technical skill development, and
leadership/management seminars. Since expanding this program, total training hours have
increased 5.5x, and training per employee has moved from 1.7 to 5.8 hours. The company has
also set a goal to reduce voluntary turnover by 10%. Currently, Lavoro's workforce is 36%
women - 10% above the industry average. Targets have now been set to increase the presence
of women in senior leadership, along with reducing the unjustifiable gender pay gap, by 2025.
To achieve these goals, the company will look to increase its efforts in attracting top female
talent, along with increasing its training and retention efforts to create a sustainable pool of
senior female leaders within the business.
5 December 2023 16
FIGURE 12. Lavoro Workforce Gender Breakdown FIGURE 13. Lavoro Hiring by Gender
1000
875
900
800
Women, 700 594
586
36.2% 600
500
400 350
300
200
Men, 63.8% 100
0
2020/21 2021/22
Men Women
Lavoro is also committed to helping serve the communities it operates in. During the 2021/22
crop year, the company invested R$1.85mn via incentive laws to benefit over 60k people in 6
Brazilian states, with a focus on cultural, sporting, and social events. Additionally, Lavoro
partners with Sesc Mesa Brasil, the largest initiative to fight hunger in the country. Benefiting
~30k people, the company donated 60 tons of food, along with 150k meals donated by
Qualicitrus - one of the companies under Lavoro's umbrella. Finally, Lavoro works with its
producers to make donations, such as 88 tons of fertilizer and 235 hectares of land where all
profits from the sale of grains were donated.
Corporate Governance
Regarding corporate governance, Lavoro's board is made up of seven independent members,
each elected for two-year terms. Currently, 3 board members are representatives of Patria
Investimentos - the fund manager that is the majority shareholder of the company - and only 1
of 7 is female. The board of directors also selects the Executive Board for two-year terms, which
also only has one female member. The company has noted, however, that it wished to have a
30% makeup of women on the Board and in leadership positions by 2025. Additionally,
Lavoro utilizes an Ethics Committee, which has at least three members of the Executive Board
at all times, to increase transparency and promote ethical business practices.
Risks
As a company seeing a majority of its growth from M&A, dilutive transactions could slow down
the business, as well as delays on expected synergies and integration. Adverse weather also
poses a risk of disrupting planting seasons and acreage count - both key inputs to LVRO's
revenue. We also see challenges in the face of fluctuating commodity prices as
decreases impact on growers’ purchasing decisions and negatively affect their ability and
decisions to purchase agricultural input products and services; and volatile exchange rates as
the company is based in Brazil and now reports in USD. Other key risks include inflation,
unfavorable legislation, and failure of product adoption.
5 December 2023 17
The Advantages of Brazil

BZ has been in the Ag spotlight for some time, forcing major crop input players to make a name
for themselves in the nation. In this section, we assess the factors that differentiate Brazil from
other regions, such as greater ag production growth and its ability to double or triple crop
annually. Other aspects that accelerated BZ's agricultural expansion include its export-oriented
macroeconomic policies, benefits from currency devaluation, crop-specific agricultural policy
incentives, improved sanitary controls, acquisition of foreign competitors, and a growing
multinational presence and foreign investment in the region.3
Agricultural expansion potential

A main factor separating US and BZ is the latter's ability to increase agricultural productivity.
The nation is now a top-5 producer of 34 commodities and has become the world's largest net
exporter. According to the USDA, the value of Brazil’s agriculture measured in US dollars,
including cultivation of crops and livestock production, expanded 8%/year on average from
2000–2020, doubling agricultural output and tripling livestock production. Meanwhile, the US
has grown ~1-2% annually per our calculations. We do note that the US encompasses 1.4x more
ag acres vs BZ, implying limited growth on an already large basis; however, for Ag input
companies' revenue, we see BZ as a major driver, offering plenty of market share for grab.
Brazil's acceleration is driven by 1) agricultural research that has increased yields, 2) expansion
of arable land, and 3) investments in technology to develop crop and forage variation, all
backed by elevated demand to feed growing populations especially in the last ten years.
Zooming in on the second point and alluded to above, Brazil's crop acreage is up 110% from
2002-2022, while that in the US is up a mere 2%. Long term over the next 10 years, the
USDA expects acreage in the US to be flattish to slightly down while the Brazilian Ministry
of Agriculture foresees 20% expansion of grain acres in its country.4 5 BZ's continued land
expansion in the future will stem from 1) previously uncultivated land (i.e. in the western
frontier region, ethanol expansion) and 2) the expense of other land uses (i.e in the traditional
center-south region, sugarcane production replaces former applications).
Further, a significant motivation in the ag space comes from the expansion of BZ's hog and
poultry industries, with newfound demand of meat and eggs as families earn higher
incomes. While edible bean and rice output followed the same trajectory as the population,
soybean and corn production grew faster to feed these aforementioned animals. Additionally,
BZ's ability to harvest two or three seasons of the same of crop (soybean and corn) during the
course of one year makes the nation stand out vs other grain and soybean-centric players; the
US only has one season per year per crop type, with wheat being the only exception, though
winter wheat planting is generally quite small.
3
https://www.ers.usda.gov/amber-waves/2022/september/brazil-s-momentum-as-a-global-agricultural-supplier-faces-
headwinds/
4
https://news.agropages.com/News/NewsDetail---47192.htm
5
https://www.ers.usda.gov/webdocs/outlooks/105853/oce-2023-01.pdf?v=8864.8
5 December 2023 18
FIGURE 14. BZ Crop Acreage Growth FIGURE 15. US Crop Acreage Growth
Acres (mn) Acres (mn)

180 300
150 250
120 200
90 150
60 100
30 50
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Soybean Corn Wheat Cotton Others Soybean Corn Wheat Cotton Others
Other crops include Cottonseed, Sorghum, Rice, Rapeseed, Barley, Peanut, Other crops include Cottonseed, Sorghum, Rice, Rapeseed, Barley, Peanut,
Sunflowerseed, Oats and Rye Sunflowerseed, Oats and Rye
Source: USDA, Barclays Research Source: USDA, Barclays Research
FIGURE 16. Planting and Harvesting cycles, BZ vs US
Data compiled by Bloomberg Intelligence

Source: Bloomberg, USDA, PotashCorp, Agrium, Bolsa de Cereals
Export-oriented macroeconomic policies

Since the beginning of the 2010s, Brazil has leveraged its position as a growing agricultural
producer to take a larger position in the export market. In the last 10 years, Brazilian exports
have increased 48%, as the country has shifted from being an exporter of mainly tropical
products, such as coffee and sugar, to key staple commodities (i.e. unprocessed primary bulk-
oilseeds, grains, cotton, tobacco- and semi-processed commodities -grain flours, vegetable oils,
animal products-). While some of this growth can be explained by the aforementioned
expansions of cropland and technology, policy changes have also helped to increase the
country's exports. Legislative impacts stretch back to the 1980s, when the government enacted
new laws to remove export restrictions on commodities and meat, opening up the market for
core agricultural exports. The implementation of stable monetary policy also helped to make
the country an attractive low-cost supplier of food. With this, production began to rise, and the
industry boomed. Additionally, Chinese demand has been the driver of much of
Brazilian export growth, as that country's growing population has bolstered its food demand.
By 2021, China received 39% of Brazil's total ag exports and 70% of soybean exports by volume.
Corn is now being shipped between the two countries as well, with the first shipments in
November 2022. By January 2023, China had become the primary destination for Brazilian corn
by volume, and 90 new companies had been approved to export to China. The two countries
5 December 2023 19
will most likely look to deepen their trade ties in the coming years, as Brazil's cropland and ag
production continues to rise.
Globally, Brazil has become the largest competitor to the US, leveraging its second-crop corn
which elevated exports from September to January -- a time historically dominated by Northern
Hemisphere producers. Likewise, BZ's soybean exports surpass that of the US by 20% on
average, a feat retrospectively, as BZ's quantity was 40% of the US soybean exports in 2000.
FIGURE 17. Main Crops grown in Brazil and the US, 2021/22
Metric tons (mn)
383
122 131 131 135

116
45
8 18 12
Wheat Corn Soybean Oilseeds Cotton
U.S. Brazil
Source: USDA, Barclays Research
FIGURE 18. Breakdown of BZ's Ag product export destinations FIGURE 19. Crops Exported from BZ
Soybean and its products

China 1% 1% 5%
2% Meat
27% European Union 3%
34% Forestry products
USA 6%
Cereals, flours and prep
Middle East 40%
8% Sugarcane and derivatives
2% Africa Coffee
2%
Japan Fibers and textiles
6% 8%
Thailand Tobacco and its products
6% 15% Juices
8% Others
10%
Leather and its products
16%
Others
2021 split 2022

Source: farmdoc.illinois.edu, Barclays Research Source: Ministério da Agricultura e Pecuária, Barclays Research
5 December 2023 20
FIGURE 20. US Crops by Export Destination FIGURE 21. Crops Exported from the US
Soybeans
China
20% 17% Corn
25% Mexico
Beef & Beef Products
Canada
Dairy Products
Japan 39%
European Union 9% Cotton
2% Tree Nuts
South Korea
2% 15%
2% Taiwan Wheat
6%
2% Philippines Pork & Pork Products
5% Colombia 5% Soybean Meal
6% Vietnam 3% 5%
14% Poultry Meat & Products*
7% 3% 5%
Others 4% 4%
Others
2022 2022 -Excludes eggs

Source: USDA, Barclays Research Source: USDA, Barclays Research
Currency Depreciation
Extended periods of depreciation of the BRL have led to agricultural expansion as 1)
devaluation increases prices of commodities in local currency; and 2) foreign importers see BZ
as a more attractive low-cost supplier of food and ag products. This occurred in the deep
recession of 2014-2016 in BZ, where the BRL's devaluation motivated Brazil’s farmers to
incorporate more land into production and multiply double-cropping. BZ farmers saw better
net returns despite the weak-dollar denominated prices in global markets.6 Additionally,
producers and processors with foreign-denominated debt would see that debt amplify in local
currency terms.
FIGURE 22. BRL/USD FX since 2000
BRL/USD
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
BRL/USD
Source: Bloomberg, Barclays Research
As noted by the USDA, in 2015 and 2020, Brazil had two major currency devaluations. The
accumulated devaluation between 2015 and the peak nominal rate in mid-2020 was 103%. The
organization also performed an analysis on the impact of Real currency devaluation
vs sustained growth, with the results below supporting the thesis that the former scenario
would generally bolster BZ ag exports.
6
https://www.ers.usda.gov/webdocs/publications/99427/err-276_summary.pdf?v=9464.2
5 December 2023 21
FIGURE 23. USDA Study - Change in BZ's average exports in 2019-2028 based on Real (currency)
growth or devaluation
% difference from
reference scenario
12%
8%
4%
0%
-4%
-8%
-12%
Corn 1st crop Corn 2nd Cotton Soybeans Soymeal Soyoil Sugar Beef Pork Poultry
crop
Accelerated depreciation Sustained growth
Scenarios: 1. An accelerated devaluation scenario in which Brazil’s BRL depreciates against the U.S. dollar at a faster pace
than assumed in the 2019-28 projections. It assumes an abrupt 31% devaluation in 2019—the first year of the projection
period—and a cumulative devaluation of 24% thereafter through 2028; and 2. A sustained-GDP-growth scenario in which
Brazil’s GDP growth remained robust after 2014, never went into recession, and continued to grow an average of 3.2 percent
annually until 2028
Source: USDA, Barclays Research
Fertilizer Usage
From 2015-2020, fertilizer usage in the US per hectare of arable land has been declining
according to the World Bank whereas that in BZ has been steadily increasing. As of 2020, the
former stands at 126 kg/ha, while the latter is at 365 kg/ha arable land (fertilizer products cover
nitrogenous, potash, and phosphate fertilizers including ground rock phosphate, while
traditional nutrients--animal and plant manures--are not included).7 8 On a total-nutrient use
basis in 2020/21 year, US (~20.9mn mt) and BZ (~19.6mn) are much closer.9
FIGURE 24. Consumption of fertilizers ('000 of nutrients per year, 2021e)
China
India
US
Brazil
Indonesia
Pakistan
Canada
Russia
Australia
Ukraine
0 10 20 30 40 50
million mt of nutrients
Source: NTR 2022 FactBook, Barclays Research
In 2022, the Brazilian government instituted a plan to minimize its dependence on

nutrient imports. The program aims to reduce fertilizer imports from the current 85% to 45% by
2050, includes a new tax policy, provides support for private firms to expand fertilizer
production capacity, and incentivizes the use of organic fertilizers. This provides further benefit
for certain players wanting to enter the fertilizer market in BZ, particularly those that mine/
produce nutrients.
7
https://tradingeconomics.com/united-states/fertilizer-consumption-kilograms-per-hectare-of-arable-land-wb-
data.html#:~:text=Fertilizer%20consumption%20(kilograms%20per%20hectare%20of%20arable%20land)
%20in%20United,compiled%20from%20officially%20recognized%20sources.
8
https://tradingeconomics.com/brazil/fertilizer-consumption-kilograms-per-hectare-of-arable-land-wb-data.html
9
https://nutrien-prod-asset.s3.us-east-2.amazonaws.com/s3fs-public/uploads/2022-06/
Nutrien%202022%20Fact%20Book.pdf
5 December 2023 22
Crop Technology Potential

BZ has the potential to incorporate more advanced technologies then what is currently
incorporated on a mass-scale. From our market research, we see that advanced tools from the
US have also found a home in BZ -- though these are more prevalent for larger farmers vs small
to medium players. Main challenges here are farmer affordability, access to credit, and
supply chain/logistics/transport. We see this gap as lucrative potential, with the right price
points. We are also optimistic on farmers' willingness to adopt newer tools, such as
better precision and data management, based on the incorporation of genetically-modified
(GM) seeds; BZ holds a 94% GM adoption rate across its crops and accounts for a high global
share of GM acreage (~30%), despite making up only ~7% of the world's arable land.10 With the
Brazilian government now expanding tests for drought-resistant genetically modified wheat,
the GM market could gain another ~7mn acres of land. Excluding these recent developments,
the GM market for primary crops in Brazil is set to grow at a 1.8% CAGR over the next decade -
outpacing the United States' growth in the same crop categories (CAGR of 0.77%).
FIGURE 25. US and BZ are the top GM crop planters
Actual Maize Yields Maize Yield Gap

Adoption GM Area (mn
Rank* Country Biotech Crops (avg tonnes per as of 2018 (mt
Rate hectares)
hectare) per hectare)
Maize, soybeans, cotton, alfalfa,

1 USA ** 95% 71.5 canola, sugar beets, potatoes, papaya, 10.5 0
squash, apples
2 Brazil ** 94% 52.8 Soybeans, maize, cotton, sugarcane 5.8 0
3 Argentina ** 100% 24.0 Soybean, maize, cotton, alfalfa 7.9 0.98
Canola, soybeans, maize, sugar beets,

4 Canada ** 90% 12.5 9.2 0
alfalfa, potatoes
5 India ** 94% 11.9 Cotton 3.1 0.4
25 Bangladesh N.A. < 0.1 Brinjal/Eggplant 8.0 0
26 Nigeria N.A. < 0.1 Cotton 1.9 1.36
27 Eswatini N.A. < 0.1 Cotton 1.3 N.A.
28 Ethiopia N.A. < 0.1 Cotton 4.2 2.48
29 Costa Rica N.A. < 0.1 Cotton, pineapple 1.8 1.93

*Rank based on area for biotech crops, **Mega-countries growing 50,000 hectares, or more, of biotech crops.
Source: International Service for the Acquisition of Agri-biotech, Barclays Research
10
https://tradingeconomics.com/brazil/arable-land-percent-of-land-area-wb-
data.html#:~:text=Arable%20land%20(%25%20of%20land%20area)
%20in%20Brazil%20was%20reported,compiled%20from%20officially%20recognized%20sources.
5 December 2023 23
FIGURE 26. Value of Brazilian GM Corn and Soy Market (in $USD mn)
$8,000 $7,216 $7,387

$6,923 $6,972 $7,039
$6,496 $6,393 $6,307 $6,443 $6,552 $6,767
$7,000 $6,055
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-
2022 2023e 2024e 2025e 2026e 2027e 2028e 2029e 2030e 2031e 2032e 2033e
Corn Soybeans
Source: S&P Global, Barclays
Customer Base Differences

Zooming in on the consumer, we see some differences between US and BZ. For one, US farmers
seem to be older and have smaller farms that are usually family enterprises where owners
operate machinery themselves. Meanwhile, in the semi-arid regions of BZ where 90% of the ag
money sits, large corporations run massive farms.
We see scope for new technology in both regions, with BZ slower as a result of farmer
affordability issues and access to credit, with supply chain problematic during the pandemic
though this has improved.
5 December 2023 24
Challenges to overcome in Brazil

Though Brazil has some short term issues to overcome, we affirm a very positive medium to
long term outlook and think the pros outweigh the cons. Amongst others, the nation's
highly fragmented ag input space makes it difficult for players to gain a large
share, transportation costs still seem higher in BZ vs the US though the gap has narrowed over
recent years, FX volatility can be troublesome, and political instability is a risk to investment in
the region.
Fragmented Ag environment
The highly fragmented ag retail industry in Brazil, with more than 14,000 players, means that
companies that grow via M&A will need extra capital and time to do so, as they would have to
negotiate with numerous entities. For context, the top 10 players in BZ are ~40% of crop input
and seed retail sales (excluding fertilizer, specialties, and co-ops) while in the US, these form
over 60%. In the US as of 2020, Nutrien alone covers ~30%. Along with sellers, farm count is also
a pain point, with BZ at 4.4mn vs ~2mn US farms; this again requires extra capital spend and
time to build up a sizable and loyal customer portfolio. A summarized breakdown of BZ growth
and key competitors follow:
• Crop Protection - the crop protection market has grown at an average of 11% per year and is
valued at more than R$60bn. Key suppliers in the segment include Bayer, BASF, Syngenta,
and Corteva.
• Seeds - the Brazilian seed market has grown at an average of 13.7%, now valued at greater
than R$30bn. Key suppliers include Bayer, Syngenta, and BASF.
• Fertilizer - NPK revenues have grown at a CAGR of 18%, reaching a market value of R$97.9bn
in FY21. 85% of fertilizer is imported in Brazil, meaning global suppliers would essentially
deliver this to a port facility in BZ and then would ship it to one of the major distributors in
the market; after taking the stock into their warehouses, these distributors would allocate to
the various regions in BZ, implying a decent size wholesale distribution channel built into the
market. The three prominent fertilizer distributors here, by volume, are Yara, Mosaic, and
Fertipar.
Barter System
Farm bartering is a system of trade that involves the exchange of future crops for credit and/or
inputs, and can expose suppliers to greater commodity risk vs US's supplier system. In simplest
terms, the supplier provides credit for ag inputs (e.g., seeds, crop protection products,
fertilizers, and specialty products) and the recipient farmer pays for it in installments of crop
from that growing season's harvested crop. Suppliers can choose to take the actual delivery
and resell the crop, or swap the liability with a grain trader to hedge and eliminate
commodity price exposure. Barter transactions are made legal through notary offices and
registration. The practice is very common in Brazil, especially in times where financial credit is
limited or unavailable. In the country, bartering accounts for roughly 35% of the $26bn in
fertilizer and agrichemical sales, primarily in the South and Southeast. For context, in fiscal
FY23, Lavoro derived ~7% of all revenues from bartering, compared to 9% for FY22.
Most commonly with soybeans or corn, bartering became popular in Brazil due to the
country's high lending rates (low credit availability for farmers) and because it reduces
payment risk for suppliers by designating crops as collateral. While the practice is popular,
it is still mostly limited to larger farmers that grow soybeans, corn, and cotton.11 As such,
significant growth and upside exists for the practice. It should be noted, however, that barter
11
https://labsnews.com/en/news/business/masterbarter-agfintech-wants-to-boost-barter-trade-in-brazil/
5 December 2023 25
rates may see more fluctuation as crop prices become more volatile. In the 19/20 harvest,
falling crop prices and a rising cost of inputs drove the rate of bags of soybeans for crop
protection/fertilizer per HA of land to historical highs, as seen in Figure 14. While levels have
normalized, the risk for hikes looms.
FIGURE 27. Soybean Barter Exchange Rates in Southern and Southeastern Brazil
9.0 8.1
8.0
6.7
7.0
6.0 5.55.6 5.4 5.55.6 5.5
5.1 5.1 4.8 5.1 5.15.0 4.8
5.0 4.2 4.3
3.8 3.9
4.0 3.0
3.0
2.0
1.0
0.0
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Crop Protection Barter Rate Fertilizer Barter Rate FX (USD/BRL)
Refers to number of bags of soybeans bartered for a set package of crop protection or fertilizer for one HA of land
Historical barter rates reveal that levels have remained relatively stable over the past decade,
especially in contrast with rising FX and inflation rates seen in Brazil. With this stability, farmers
have been able to maintain a solid pattern of agricultural input purchases. Additionally, retail
players note that the current high crop prices are likely to strengthen the barter rate, benefiting
farmers and near-term demand for ag inputs in the country. As such, these companies will likely
continue to use the barter system as it expands its market presence and maintains lasting
partnerships with farmers.
Severe Weather
As we highlighted in our report earlier this year, Extreme weather: The rise of food insecurity,
May 23 2023, severe weather is more frequently impacting yields, company operations, and
customer demand. We note some differences in terms of drought between North and South
America, with the US at a lower risk vs Brazil and Argentina, as seen in Figure 28. We saw
this come into play this year, with a dramatic drought impact to soybeans in Argentina, which
S&P and ag players report produced a crop size ~17mn mt lower YoY (2022-23 season vs prior
year, down 35%).12 Brazil and Paraguay, the third major ag competitor in South America, also
faced droughts in 2022. Wheat within the US Midwest is showing impacts this season and in
2022 through sorghum, where US yields went from ~68 bushels per harvested acre (in the 2010s)
to 41 bu/acre, with dry spells as the main cause (lower acreage and poor yield for planted
acres).13
12
https://www.agriculture.com/weather-dents-argentina-s-wheat-crop-forecasts-for-rain-offer-relief-7964585
13
https://blinks.bloomberg.com/news/stories/RUTNDFT0AFB4
5 December 2023 26
FIGURE 28. Global trend in drought 1980-2021
Difference in SPEI drought index between 2021 and 1980 (-3 is strong drought)
Source: Barclays Research, SPEI Global Drought Monitor
Transportation - improving but still underdeveloped

Historically, BZ saw higher transportation costs, driven by the nation's dependence on trucks;
these expenses seem to be decreasing but still seem above US levels and are more volatile.
Studies have shown that 1) BZ's system is inferior in quality, connectivity, and quantity vs the
rest of the world (World Economic Forum) and 2) 66% of Brazilian highways as fair, bad, or very
bad as of 2022 (Confederação Nacional do Transporte - CNT).14 These issues contribute
significantly to variable costs.15 Looking into soybean- encompassing 40% of BZ's exports-
50% of this commodity is transported via trucks; given truck reliance, goods take much longer
to reach ports. For further context from the CNT, the BZ highway system totals ~1mn miles, with
approx 14% of the roads paved while the US system involves ~4mn miles, with 70% of U.S. roads
paved.
The government has laid out plans to shrink highway dependency from 60% (2019) to 50% in
2025, with railway importance to increase from 21% to 35% and barges from 14% to 29%.
Likewise, the gap between costs in BZ vs US has been narrowing, seen in Figure 29; this is in part
driven by the weakening BRL since the 2010s, but also improvements in infrastructure and
increasing waterway use vs roads. Transportation in BZ is not only a challenge but also an
opportunity to reap substantial gains when fixed; however, we estimate this will take a long
time.
14
https://www.climatepolicyinitiative.org/publication/finance-landscape-of-highways-and-railroads-elements-for-
strengthening-the-governance-of-infrastructure-investments-in-the-brazilian-amazon/
#:~:text=Brazil's%20weak%20transport%20infrastructure%20is,fair%2C%20bad%20or%20very%20bad.
15
https://www.agfax.com/2019/02/19/u-s-farmers-take-a-close-look-at-farming-in-brazil-dtn/
5 December 2023 27
FIGURE 29. BZ shrinks US Transport advantage
US$/Metric Tons
130
109.86
110
90 84.68 92.04
86.44
79.43
70 78.33 72.86
69.67
50
2015 2016 2017 2018 2019 2020
Mato Grosso through Port of Santos (South)
Mato Grosso through Port of Santarém (North)
Iowa through U.S. Gulf
Minnesota through U.S. Gulf
Source: University of Sao Paulo, Escola Superior de Agricultura, agupdate.com, Barclays Research
Inventory Management
Ag inputs and services see their demand peak from October - December, with a second surge of
demand from January - March. As such, sales are highest during the spring season and for
companies with high percentages of bartering sales, working capital requirements peak just
after the end of the season. For those with lower bartering percentages, WC would spike pre-
season. Regardless, with this double peak in seasonality, inventory management becomes a
significant risk.
FIGURE 30. Brazil Crop Cycle
Source: LVRO company report, Barclays Research
5 December 2023 28
Game plan: How to be successful in Brazil

We believe the smartest route in Brazil is to to provide advanced crop/farming
technologies (eg. better soil testing, satellite or aerial photography, yield monitors, global
positioning systems, global information systems, weather monitoring) and target the small to
medium farmers (approx. 65% of BZ's agricultural land). Advanced technology is already
accessible to larger farmers (provided by companies such as NTR), meaning the rest are using
older tools which impact yields. Main limitations for these planters are farmer
affordability, access to capital/credit, and supply chain/transport issues. Companies that shape
advanced offerings to better fit the lifestyles of these small to medium farmer market are more
likely to be successful. Likewise, we think affordability should improve in the coming years, as
we expect crop prices (corn, soybean) to be structurally elevated vs historical levels, due to
extreme weather, input price variability, and the overarching need to feed the growing
population and the animals that make up our meals. This should improve farmer wallets as
inflation settles to a more normal level in BZ. A company that has only crop tools would also be
able to avoid bartering system risk linked to volatile commodity prices.
Another possible route would be to jump-start M&A within the differentiated crop input
and seed space, as the Brazilian ag industry is too fragmented to create new retail locations
and having less commodity exposure should help boost top and bottom line. In this case, the
medium to small farmers are more likely to participate in this consolidation vs agro-
industrialists who most likely have sufficient contracts or options for their inputs.
Route 1: Enter with technology

Brazil uses much of the same advanced technologies that farmers in the US have generally
adopted, such as satellite technology and precision data; this is prevalent within large farms
and some medium as the rest have affordability issues, may not have access to credit or are
offered unreasonable credit terms, and/or have supply chain issues in sourcing and
transporting inland on BZ's current infrastructure. Brazilian ag technology is usually integrated
within machinery and smaller farmers sometimes purchase equipment in groups (co-ops). We
believe market share can be gained by 1) providing technology that is more advanced than
what these farmers have but still affordable, 2) package/adjust more novel technology in forms
that are more user-cost efficient, or 3) create some new technology that has a lower cost/lower
benefit but still improved yield enough to overcome price tags . We also understand that
internet accessibility varies per region, with central BZ (home to the large agro-industrialists)
generally having better connectivity vs the south/SE area skewed towards smaller growers. This
machinery offered would need options where full capability is possible offline and online and/or
work around connectivity issues by installing extra storage capacity. We also note that NTR (and
most likely other major ag input players) work with large farmers, with a majority of this specific
entity's customers above 4,000 acres and 10%+ that are over ~19,000 acres in BZ. An
undeserved medium to small population would be valued in the nation that is going to be
crucial for food production; LVRO is currently bringing more soil testing to this subset and
is working on increasing rural insurance access with recent its partnership with insurance
company Brasilseg16 -- a benefit for tech players as this increases farmer affordability. We also
believe that crop prices (corn, soybean) should remain structurally higher vs historical levels -
and therefore improve planter incomes - due to severe weather, input price variability, and the
overarching need to feed the growing population and the animals that make up our meals.
All these factors would require much R&D to either adapt remotely modern or create new
technologies. Additionally, a main challenge for any company entering a fragmented market
16
https://research.alpha-sense.com?docid=MTN-
d094cca953b51e2c99dbf2ef5dc98e7e36471182&utm_source=alphasense%20platform&utm_medium=document%20sh
are&utm_content=MTN-d094cca953b51e2c99dbf2ef5dc98e7e36471182&utm_campaign=1701212701485
5 December 2023 29
would be gaining the trust of its customers, in this case farmers. Therefore, we believe this
strategy would entail partnering with players across industries; this could be with higher
end grocery stores that are looking to be more green (traceability, less water/land use with
better technology), crop input companies already in BZ looking to expand capabilities,
energy companies looking for better soybean oil output, etc; and would not be
about creating new relationships but relying on existing ones. Instead of building a well-
known technology brand, these data-driven contenders instead work in the background with
many players within a multitude farms.
Route 2: M&A of Crop Input and Seed Players

Given the 14,000 participants in the crop input space, a clear strategy would be to acquire and
optimize costs and structure. NTR is an example of this strategy, though after spending
~$500mn on 15 retail acquisitions by EOY 2022, it has gained only 3% share according to
Bloomberg.17 Likewise, we note that LVRO is considered the ag retail leader in Brazil, with only a
10% market share. While still a feat, these minimal shares speak to the capital and efforts
needed in this route. This year, NTR has seen the downsides to retail in BZ, with margins
significantly impacted from inventory build up and now destocking. MOS also has been hurt by
a delay in farmer purchase schedules and high cost inventories in BZ. On the other hand, both
names performed well in the pandemic, when fertilizer and crop input prices jumped.
Retail does imply exposure to the bartering system, though by offering financial tools,
similar to NTR's crop insurance option, players can somewhat offset risk. For example, if a
planting season comes in weaker than planned, farmers who purchase insurance from an ag
retailer would first allocate payment to the retailer and then to other affected parties.
17
https://www.bloomberg.com/news/articles/2022-12-01/nutrien-sharpens-brazil-focus-after-inking-500-million-in-deals
5 December 2023 30
Lavoro Appendix
Recent Results Recap
On November 1, 2023, Lavoro reported its 4FQ23 (period ending June 30th, 2023) and fiscal
FY23 results:
FIGURE 31. Lavoro 4FQ23 Results Recap (in R$mn, except EPS)
(R$mn, except EPS) 4FQ23 4FQ22 YoY

Revenues 1,315 1,122 17.2%
Gross Profit 232 182 27.5%
Operating Profit (59) (121) 51.3%
EBITDA (4) (74) 95.3%
Net Profit attributable to Parent (83) (110) 24.7%
Basic EPS (0.73) (0.96) 24.0%

Diluted EPS (0.72) (0.96) 25.0%
Gross Marin 17.6% 16.2% 142

Operating Margin -4.5% -10.8% 632
EBITDA Margin -0.3% -6.6% 636
Net Margin -6.3% -9.8% 349
Highlights from the conference call include:
• Crop Care revenues and gross profit expanded 94% and 137% YoY, respectively, in USD. This
growth was driven by strong demand for existing products as well as cross-selling synergies.
Crop Care also now accounts for 19% of adj. EBITDA, a jump from 8% in fiscal 2022. The
growth trend is expected to continue.
• Price declines have outpaced volume gains so far with data from 1FQ24. This has been fueled
by destocking and farmers delaying their purchases until product is needed, as opposed to
stockpiling. Price contractions are expected to slow in June of 2024.
• Management called out a still worsening environment for herbicides and fertilizers in 4FQ23,
facing significant headwinds with both price declines and excess inventory. The company
believed the inventory issues around herbicides will clear up by the end of CY23 but with
recent data - post the earnings call - says this should clear Jan/Feb 2024.
• Regarding M&A, the company closed a deal with Referencia Agroinsumos in July, adding 9
stores in the state of Rio Grande do Sul. LVRO also has seven additional MOUs
signed. Additionally, the NS Agro acquisition - which would have expanded the company's
business to Chile and Peru - has been postponed indefinitely due to FX headwinds and
adverse macro conditions.
• Lavoro's commercial pilot program with Pattern Ag has had positive feedback with a
coverage of 80,000 acres in Brazil. The program allows the company's RTVs to better advise
clients through soil DNA sequencing. The company is also launching a campaign with Stenon
for the winter harvest focused on nitrogen soil testing. Long-term, Lavoro looks to partner
with companies that could help to provide farmers with more accurate weather predictions.
5 December 2023 31
Additionally, the company provided the consolidated results for FY23 (period of July 1st, 2022 -
June 30th, 2023) as shown below. We flag that net profit for FY23 was impacted by a one-time
NASDAQ listing expense of US$61.5mn.
FIGURE 32. Lavoro FY23 Results Recap (in R$mn, except EPS)
(R$mn, except EPS) FY23 FY22 YoY

Revenues 9,347 7,747 20.7%
Gross Profit 1,731 1,326 30.6%
Operating Profit 227 260 (12.7%)
EBITDA 394 505 (22.0%)
Net Profit attributable to Parent (261) 78 (433.4%)
Basic EPS (2.29) 0.69 (431.9%)
Diluted EPS (2.26) 0.69 (427.5%)
Gross Marin 18.5% 17.1% 141

Operating Margin 2.4% 3.4% (93)
EBITDA Margin 4.2% 6.5% (230)
Net Margin -2.8% 1.0% (380)
Guidance & Long-Term Perspective

Management also provided guidance for FY24 as follows:
• Consolidated revenue in the range of US$2-$2.3bn (lower than the previously shared $3.4bn
target).
• Inputs revenue in the range of US$1.7-$2bn (excl. barter revenues).
• Adj. EBITDA of US$135-$165mn (implied margin of 7.9-8.3%).
• 40-50% delivered in the second half of the fiscal year. This is a derivation of regular patterns -
as the company typically sees ~25% of EBITDA in 2FH - driven by changes in farmer buying
patterns/destocking along with phasing effects in Crop Care.
• Additionally, 1FQ results are expected to be the low point in the year for adj. EBITDA due to
the aforementioned phasing effects.
• The overall Brazilian ag input market is expected to decline by 20% for 2024. 2025 should see
a return to normalcy.
Estimates Overview
We assume the company delivers results within its guidance range, at the mid to lower end.
Based on the current BRL/USD level of close to 5 to 1, our BRL revenue estimate of R$10.5bn is
equivalent to ~US$2.1bn, while our BRL estimate of R$733mn translates to ~US$147mn.
Seasonality is expected to be atypical in FY24, with 1FH24 representing less EBITDA contribution
than in the past, and in particular with a "soft" 1FQ. Given this short term results overhang,
coupled with its low trading liquidity we initiate with an EW rating and a US$7 price target.
5 December 2023 32
FIGURE 33. LVRO Estimates Overview (in R$mn, except EPS)
(R$ million, except EPS) 2023 2024e YoY Growth 2025e YoY Growth 2026e YoY Growth
Revenues 9,347 10,465 12.0% 11,529 10.2% 12,461 8.1%

Gross profit 1,731 2,099 21.3% 2,383 13.5% 2,669 12.0%
EBIT 227 549 141.9% 783 42.7% 948 21.1%
EBITDA 394 733 85.9% 984 34.2% 1,167 18.6%
Net Income (Majority) (261) (55) 79.0% 131 na 221 69.5%
EPS (Majority) (2.26) (0.47) 79.0% 1.13 na 1.92 69.5%
Gross Margin 18.5% 20.1% 154 20.7% 61 21.4% 74

EBIT Margin 2.4% 5.2% 282 6.8% 155 7.6% 82
EBITDA Margin 4.2% 7.0% 279 8.5% 153 9.4% 83
Net Margin -2.8% -0.5% 227 1.1% 166 1.8% 64
Management Team
Ray Cunha (CEO) has been in the position since February of 2022, previously serving as
Lavoro’s Chief Transformation Officer and Chief Operating Officer. Prior to joining the company,
he was the president of Santal Equioamentos S.A., and a managing director for sugar cane
equipment at AGCO Corp, a leading global manufacturer of agricultural equipment. Mr. Cunha
also spent time in consulting and leading the process engineering teams at General Motors of
Brazil. Mr. Cunha has a bachelor’s engineering degree from Instituto Mauá de Tecnologia, a
specialist degree in business from Fundação Getulio Vargas and an MBA from the Kellogg School
of Management at Northwestern University.
Marcos Haaland is the Chairman of the Board, a position he started in February of 2023
following the Closing of the Business Combination. He was also appointed as the Operating
Partner at Patria starting in February 2023. Prior to these roles, Mr. Haaland was a Managing
Director for Alvarez & Marsal Brasil Participacoes Ltd, leading the Agribusiness unit. He has also
served in a variety of board member and management roles, most notably guiding
Nutriplant Industria’s IPO in 2008. Mr. Haaland holds a bachelors’ degree in mechanical
engineering from Universidade Estadual de Campinas, Brazil, a MSc from University of Illinois,
USA and an MBA from INSEAD, France. He is a certified board member from the Brazilian
Institute of Corporate Governance.
Julian Garrido Del Val Neto (CFO) has been the Chief Financial Officer of Lavoro since May
2023. Prior to joining the company, he was the CFO and head of Investor Relations Officer of
Alparagatas S.A., a Brazilian manufacturing company. He has also served as CFO and senior
finance roles for SKY Brazil, GE Healthcare, and Andrtiz Hydro Inepar. Mr. Garrido holds a
Business Administration degree from Fundação Getulio Vargas, Brazil.
Gustavoa Modenesi is the Chief Strategy Officer, a position held since February 2022. He has
worked at Lavoro since its founding, serving as Chief Transformation Officer from 2019-2022.
Prior to Lavoro, he worked at Patria, one of the leading firms in alternative asset management
in LatAm – developing a new investment thesis for the agricultural sector. He has also spent
time at The Boston Consulting Group. Mr. Modenesi holds an industrial engineering degree from
the Universidade de São Paulo and an MBA with distinctions from the Ross School of Business
at the University of Michigan.
Marcelo Pessanha has served as the CEO of Crop Care since April 2022. He joined the company
initially in 2019, working as Crop Care’s business officer until his appointment to CEO. Before
5 December 2023 33
joining Lavoro, he served in various capacities at UPL Brasil, an agricultural solutions and
technology company, such as Head of Business Unit F&V, Citrus, and Coffee and Head of
Business Unit Centro. Mr. Pessanha holds a degree in agronomy engineering and agriculture
from Faculdade Dr. Francisco Maeda – FAFRAM, an MBA from Fundação Dom Cabral and an MBA
in marketing from Fundação Getulio Vargas.
Gustavo Ocampo is the Head of Lavoro LatAm, a position held since August of 2017. From
2005 to 2017, Mr. Ocampo was the CEO of Agrointegral Andina, an agricultural input retail
company, belonging to Grupo Gral (which was acquired by Lavoro in 2017). He also served as
the marketing manager of Syngenta, an agricultural science and technology company.
Previously, from 1983 to 1990, Mr. Ocampo was the commercial manager of Procampo S.A., an
agribusiness company. Mr. Ocampo holds an agricultural engineering degree from
Universidad de Caldas and a business management postgraduate degree from Universidad de
Los Andes.
Rafael Ughini Villarroel is the Business Unit Brazil President, serving in the role since
November 2022. He joined the company in 2021, first as the Head of Business Unit East in Brazil.
Prior to Lavoro, he was CEO of Oceana Minerals, a plant and animal nutrition seaweed business.
He has also spent time as CEO of Rural Brasil, a regional distribution player, and a variety of
positions at Bayer. Mr. Villarroel has a bachelor´s engineering degree from Universidade Federal
do Rio Grande do Sul and MBA degrees in Finance & Administration from Fundação Getulio
Vargas and in Strategy & Marketing in Fundação Dom Cabral / Kellogg School of Management at
Northwestern University.
Luiz Spinardi has been the Head of M&A since January 2022, joining Lavoro in 2018. He has
more than 17 years of experience in the M&A space, participating in over 30 transactions in
various sectors. He has previously worked at DGF Investimentos, HSBC Investment Bank, and
VGL Financas – working in the M&A space. Mr. Spinardi holds a degree in Business
Administration from Fundação Getúlio Vargas and an MBA from the London Business School
and a specialization in Private Equity and Venture Capital from the University of California,
Berkeley.
Company-Specific Risks
Dilutive M&A: Lavoro has been active in the M&A space since beginning its operations, looking
to grow its market share and customer base. While the strategy has been successful thus far, we
cannot rule out the possibility of dilutive M&A to continually expand and build the business.
Benefits from expected synergies could also take longer than expected or not materialize and
integration of new purchases may take longer than expected.
Adverse Weather: Given the company’s agriculture product portfolio of seeds and fertilizers,
weather plays a large role. Extreme and disruptive weather could delay planting or cause
farmers to reduce their planted acreage or applied product - weakening revenues and
potentially raising costs.
Inflation: Latin America currently faces high inflation rates. If Lavoro is unable to counteract
inflation or pass costs onto customers, it runs the risk of diminishing margins or losing revenues
due to price elasticity.
Political Risk: The Brazilian government has, and continues to, exert significant influence over
the Brazilian economy. This could harm Lavoro’s business if unfavorable laws and/or
regulations are passed.
5 December 2023 34
Analyst(s) Certification(s):
I, Benjamin M. Theurer, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the
subject securities or issuers referred to in this research report and (2) no part of my compensation was, is or will be directly or indirectly related to the
specific recommendations or views expressed in this research report.
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Primary Stocks (Ticker, Date, Price)
Lavoro Ltd. (LVRO, 01-Dec-2023, USD 6.60), Equal Weight/Neutral, J
Materially Mentioned Stocks (Ticker, Date, Price)
CF Industries (CF, 01-Dec-2023, USD 76.31), Underweight/Neutral, CD/CE/J
Corteva, Inc. (CTVA, 01-Dec-2023, USD 46.20), Equal Weight/Neutral, CE/E/J/L
ICL Group (ICL, 01-Dec-2023, USD 5.13), Overweight/Neutral, CD/CE/J/K/M/N
Mosaic (MOS, 01-Dec-2023, USD 36.90), Overweight/Neutral, CD/CE/D/J/K/L/M
Nutrien (NTR, 01-Dec-2023, USD 55.65), Overweight/Neutral, A/CD/D/E/J/K/L/M
Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the last
available closing price at the time of publication.
Disclosure Legend:
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5 December 2023 35
GD: One of the Research Analysts on the fundamental credit coverage team (and/or a member of his or her household) has a long position in the
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Risk Disclosure(s)
Master limited partnerships (MLPs) are pass-through entities structured as publicly listed partnerships. For tax purposes, distributions to MLP unit
holders may be treated as a return of principal. Investors should consult their own tax advisors before investing in MLP units.
Disclosure(s) regarding Information Sources
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Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below)
relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverage universe").
In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or Negative (see
definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the
entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment
horizon.
Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to
comply with applicable regulations and/or firm policies in certain circumstances including where the Investment Bank of Barclays Bank PLC is acting in
an advisory capacity in a merger or strategic transaction involving the company.
Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
5 December 2023 36
Negative - industry coverage universe fundamentals/valuations are deteriorating.

Below is the list of companies that constitute the "industry coverage universe":
Americas Agribusiness
AmBev (ABEV) Archer Daniels Midland (ADM) Beyond Meat, Inc. (BYND)
BRF SA (BRFS) Bunge Limited (BG) CF Industries (CF)
Corteva, Inc. (CTVA) Hormel Foods Corp. (HRL) ICL Group (ICL)
Ingredion Inc. (INGR) JBS SA (JBSS3.SA) Lavoro Ltd. (LVRO)
Marfrig Global Foods SA (MRFG3.SA) Mosaic (MOS) Nutrien (NTR)
Pilgrim's Pride Corp (PPC) Tyson Foods, Inc. (TSN)
Distribution of Ratings:
Barclays Equity Research has 1715 companies under coverage.
51% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 49% of companies
with this rating are investment banking clients of the Firm; 69% of the issuers with this rating have received financial services from the Firm.
33% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 43% of
companies with this rating are investment banking clients of the Firm; 65% of the issuers with this rating have received financial services from the Firm.
15% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 26% of
companies with this rating are investment banking clients of the Firm; 52% of the issuers with this rating have received financial services from the Firm.
Guide to the Barclays Research Price Target:
Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade
in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over
the same 12-month period.
Types of investment recommendations produced by Barclays Equity Research:
In addition to any ratings assigned under Barclays’ formal rating systems, this publication may contain investment recommendations in the form of
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Barclays may also re-distribute equity research reports produced by third-party research providers that contain recommendations that differ from
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Disclosure of other investment recommendations produced by Barclays Equity Research:
Barclays Equity Research may have published other investment recommendations in respect of the same securities/instruments recommended in this
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months please refer to https://live.barcap.com/go/research/Recommendations.
Legal entities involved in producing Barclays Research:
Barclays Bank PLC (Barclays, UK)
Barclays Capital Inc. (BCI, US)
Barclays Bank Ireland PLC, Frankfurt Branch (BBI, Frankfurt)
Barclays Bank Ireland PLC, Paris Branch (BBI, Paris)
Barclays Bank Ireland PLC, Milan Branch (BBI, Milan)
Barclays Securities Japan Limited (BSJL, Japan)
Barclays Bank PLC, Hong Kong Branch (Barclays Bank, Hong Kong)
Barclays Capital Canada Inc. (BCCI, Canada)
Barclays Bank Mexico, S.A. (BBMX, Mexico)
Barclays Capital Casa de Bolsa, S.A. de C.V. (BCCB, Mexico)
Barclays Securities (India) Private Limited (BSIPL, India)
Barclays Bank PLC, India Branch (Barclays Bank, India)
Barclays Bank PLC, Singapore Branch (Barclays Bank, Singapore)
Barclays Bank PLC, DIFC Branch (Barclays Bank, DIFC)
5 December 2023 37
Lavoro Ltd. (LVRO / LVRO)

Stock Rating: EQUAL WEIGHT
Industry View: NEUTRAL
Closing Price: USD 6.60 (01-Dec-2023)
Rating and Price Target Chart - USD (as of 01-Dec-2023)

Currency=USD
11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
Jan-2022 May-2022 Sep-2022 Jan-2023 May-2023 Sep-2023
Closing Price
Source: IDC, Barclays Research

Link to Barclays Live for interactive charting
Publication Closing Price* Rating Adjusted Price

Date Target
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Lavoro Ltd. and/or in any related derivatives.
Valuation Methodology: We derive our LVRO Price Target using a DCF approach. Our WACC of 18% is derived from a 25%/75% debt/capital structure,
with a Kd of 12% and a Ke of 20%. We use BRL reported results to derive the present value of future cash flows. To translate to our US$ price target we
apply the current BRL/USD Fx rate of 4.90 and apply a 25% "liquidity discount" given the low level of LVRO trading liquidity. Our US$ price target is
$7.00.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: On the downside, 1) any dilutive M&A
transaction, affecting the company's leverage, 2) longer lasting demand softness in core ag inputs, 3) relatively high cost of financing curbing its
ability to compete with international peers, and 4) adverse weather impacting ag economics in South America. On the upside, 1) accelerated growth
from current operations, and in particular from its crop care segment, 2) faster integration benefits from recent M&A, and 3) improved stock liquidity,
resulting in a re-rating of its shares.
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5 December 2023 38
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5 December 2023 40
Environmental, Social, and Governance (‘ESG’) Related Research: There is currently no globally accepted framework or definition (legal, regulatory
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strategy or consideration or what precise attributes are required to be eligible to be categorised by such terms. This means there are different ways to
evaluate a company or an investment and so different values may be placed on certain ESG credentials as well as adverse ESG-related impacts of
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where adverse ESG-related impacts or ESG controversies exist. The evolving nature of sustainable finance related regulations and the development of
jurisdiction-specific regulatory criteria also means that there is likely to be a degree of divergence as to the interpretation of such terms in the market.
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5 December 2023 41

Barclays NTR@CN Lavoro Ltd. Planting The Seed in Brazil Initiating Wit

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Equity Research

Planting the Seed in Brazil: Initiating

Americas Agribusiness NEUTRAL

Price (01-Dec-23) USD 6.60

LVRO: Quarterly and Annual EPS (BRL)

2023 2024 2025 Change y/y

Americas Agribusiness NEUTRAL

Lavoro Ltd. (LVRO) EQUAL WEIGHT

Long-Term Trend + Upside

Short-Term Risks and Opportunities

Valuation Methodology and Price Target (Upside and Downside)

Banking on Brazil Growth - how to be smart when going into

Major Opportunities and Challenges

Potential impacts on our expanded coverage:

For the BZ Ag retail space, we expect an increase in M&A activity or collaboration

FIGURE 1. Lavoro M&A Timeline

Source: Company Reports, Barclays Research

Listing Transaction Overview

FIGURE 2. Operating Regions FIGURE 3. Physical Store Breakdown

FIGURE 6. Brazil & LatAm Sales by Region - FY23

Rest of LatAm, 16%

Brazil North, 31%

Brazil East, 27%

Brazil South, 26%

Source: Company Reports, Barclays Research

FIGURE 9. Lavoro Sales by Product Type - FY23

Source: Company Reports, Barclays Research

Reuse Recycling Incineration Total Scope 1 Scope 2

The Advantages of Brazil

Agricultural expansion potential

Acres (mn) Acres (mn)

FIGURE 16. Planting and Harvesting cycles, BZ vs US

Data compiled by Bloomberg Intelligence

Export-oriented macroeconomic policies

Metric tons (mn)

122 131 131 135

Wheat Corn Soybean Oilseeds Cotton

Source: USDA, Barclays Research

Soybean and its products

2021 split 2022

2022 2022 -Excludes eggs

FIGURE 22. BRL/USD FX since 2000

Source: Bloomberg, Barclays Research

FIGURE 24. Consumption of fertilizers ('000 of nutrients per year, 2021e)

Source: NTR 2022 FactBook, Barclays Research

In 2022, the Brazilian government instituted a plan to minimize its dependence on

Crop Technology Potential

FIGURE 25. US and BZ are the top GM crop planters

Actual Maize Yields Maize Yield Gap

Maize, soybeans, cotton, alfalfa,

2 Brazil ** 94% 52.8 Soybeans, maize, cotton, sugarcane 5.8 0

3 Argentina ** 100% 24.0 Soybean, maize, cotton, alfalfa 7.9 0.98

Canola, soybeans, maize, sugar beets,

25 Bangladesh N.A. < 0.1 Brinjal/Eggplant 8.0 0

26 Nigeria N.A. < 0.1 Cotton 1.9 1.36

27 Eswatini N.A. < 0.1 Cotton 1.3 N.A.

28 Ethiopia N.A. < 0.1 Cotton 4.2 2.48

29 Costa Rica N.A. < 0.1 Cotton, pineapple 1.8 1.93

$8,000 $7,216 $7,387

Source: S&P Global, Barclays

Customer Base Differences

Challenges to overcome in Brazil

Crop Protection Barter Rate Fertilizer Barter Rate FX (USD/BRL)