Agrogalaxy, a major crop inputs retailer that filed for bankruptcy protection, has been working to reach some deals with suppliers to secure products to sell for famers in Brazil’s second-corn crop, known as ‘safrinha’, which seedings starts in the first months of 2025.
The arrangements are important to keep the company alive amid its judicial recovery plan, which may be announced this month. Even though, the firm is passing through a huge downsize, with 76 stores recently closed and over 500 lay-offs in October. While exact figures haven’t been disclosed, Agrogalaxy’s annual revenue from agricultural inputs is expected to be halved to 2 billion reais ($350 million) from 5.3 billion reais in 2023.
In an interview with The AgriBiz, Agrogalaxy CEO Eron Martins said the company has secured agreements with seven regional fertilizer blenders to ensure supplies for the upcoming corn “safrinha” crop.
The executive hasn’t disclosed the volumes involved in the deal and the name of the companies that have agreed to supply fertilizers to Agrogalaxy. Through these partnerships, the retailer will sell a package of seeds, specialty products, and pesticides directly to farmers and gets a commission on the fertilizer sales, with working capital remaining with the blenders — an alternative to preserve Agrogalaxy’s working capital.
Major players such as Mosaic (one of the main Agrogalaxy’s creditors with 120 million reais to receive) and Yara, which also faced some trouble to be paid by Agrogalaxy, remain distant from the retailer — and both correspond to about half of Brazil’s fertilizer matket. Still, these recent agreements may provide Agrogalaxy a few months of breathing room.
Backed by the private equity firm Aqua Capital, Agrogalaxy has also secured corn seed supplies from Grupo Don Mario, one of the world’s leading germplasm holders. The next step is negotiating with pesticide suppliers, aiming for credit terms aligned with the agricultural cycle’s payment structure.
Relationship with farmers
In the initial weeks following the bankruptcy filing in September, Agrogalaxy’s priority was to prevent a total collapse of its relationship with clients, according to the CEO.
When Agrogalaxy decided to seek protection from creditors, the company knew it lacked sufficient agricultural inputs to fulfill all the farmers’ orders just as the soybean planting was about to start. Only a fraction of the total was held in stock, a behavior that is usual in the industry.
Consequently, most of the orders became unfeasible to deliver, leading the retailer to hold difficult conversations with clients. In some cases, orders were entirely canceled; in others, only partial deliveries were made.
Restructuring Plan
Martins was reluctant to share details about the restructuring plan under development but assured that talks are progressing, with the first version of the plan expected to be presented to creditors by November. Legally, the plan must be presented within 60 days of the reorganization filing, with extensions allowed.
A key component of the plan is keeping Sementes Campea, a seed producer owned by Agrogalaxy, both operational and profitable, particularly its unit located in the municipality of Agua Fria de Goiás. The plant is seen as aa valuable asset that could help Agrogalaxy’s judicial recovery plan to succeed.
Agrogalaxy’s seed unit generated R$605 million in revenue last year, with an adjusted EBITDA of nearly R$80 million, accounting for 23% of the consolidated EBITDA despite representing only 11% of input revenue, show figures obtained by The AgriBiz.
“Sementes Campea remains an important asset,” Martins said. “It could support us through this period or, potentially, be sold during the restructuring process to bring in cash.”
