Lavoro Ltd., a Brazilian-based fertilizer giant, is actively seeking investor backing as it faces financial challenges brought on by a downturn in the agricultural sector. Once a symbol of Brazil’s booming farming industry, Lavoro is now navigating tightening credit conditions and increasing pressure to maintain financial stability. According to a report by Bloomberg, the company is in discussions with investment funds and other businesses, hoping to secure a cash injection to meet working capital demands.
Founded in 2017 by Patria Investimentos Ltd., Lavoro quickly grew into one of South America’s leading suppliers of fertilizers, seeds, and pesticides, fueled by a strategy of acquisitions. The company expanded across Brazil, Uruguay, and Colombia, acquiring numerous smaller competitors and benefiting from years of growth in the region’s agriculture industry. However, recent years have seen a reversal in fortune for Lavoro and its peers.
Farmers in Brazil, once reliant on debt-fueled expansions, are now grappling with plunging commodity prices and rising borrowing costs. This has led to a surge in defaults, impacting fertilizer suppliers like Lavoro. One of its key competitors, Agrogalaxy Participações SA, has already filed for bankruptcy protection, highlighting the severity of the industry’s challenges.
Lavoro’s financial difficulties have worsened over the past year. After merging with a US-based blank-check company in 2023, the firm’s market value has halved, driven by ongoing losses and investor concerns over its ability to manage rising debts. Lavoro’s recent earnings forecast paints a bleak picture, with the company expected to report significant losses.
Despite these setbacks, Lavoro is working to reassure investors of its resilience. The firm raised 310 million reais in August through a three-year credit facility and remains confident it can meet its debt obligations, including a $75 million bond. While creditors are pressing for more support from Patria, Lavoro is optimistic about its long-term potential, even as the agricultural sector faces continued headwinds.
