Mr. Cristiano Veloso reports

VERDE ACHIEVES C$9.4 MILLION REVENUE AND INCREASES CASH POSITION BY 82 per cent IN THE THIRD QUARTER OF 2023

Verde Agritech Ltd. has released its financial results for the third quarter ended Sept. 30, 2023 (Q3 2023). (All figures are in Canadian dollars, unless stated otherwise. Average exchange rate in Q3 2023: $1.00 (Canadian) equivalent to 3.72 Brazilian reals)

"Our Q3 results overcame the turbulent market conditions experienced in 2023. More importantly, there are reasons for optimism regarding a market recovery: the Brazilian Central Bank has reduced its interest rates and its latest announcements indicate further upcoming reductions, and agricultural commodity prices have stabilized. These factors provide better conditions for farmers, who have grappled with a squeeze in working capital from late 2022 throughout 2023. Furthermore, thanks to a $4.2-million increase in Q3 2023, we have a positive outlook regarding our cash position. This reinforces Verde's financial health to successfully navigate what has been the most challenging agricultural market in recent years," commented Cristiano Veloso, founder, president and chief executive officer of Verde.

Q3 2023 financials

• Sales of Verde's multinutrient potassium products, BAKS and K Forte sold internationally as Super Greensand by volume in Q3 2023 were 108,000 tons, compared with 189,000 tons in Q3 2022.
• Revenue in Q3 2023 was $9.4-million, compared with $27.3-million in Q3 2022.
• Cash held by the company in Q3 2023 was $9.3-million, compared with $5.1-million in Q3 2022.
• Total non-current assets in Q3 2023 were $67.3-million, compared with $55.8-million in Q3 2022.
• EBITDA (earnings before interest, taxes, depreciation and amortization) before non-cash events in Q3 2023 was negative $600,000, compared with $8.1-million in Q3 2022.
• From Q1 to Q3 2023, the company sold 323,000 tons of product, which have the potential to capture up to 38,760 tons of carbon dioxide equivalent (CO2e) from the atmosphere via enhanced rock weathering (ERW). The net amount of carbon captured, represented by carbon dioxide removal certificates (CORCs), is estimated at 20,936 tons of CO2e.
• In Q3 2023, 8,559 tons of chloride have been prevented from being applied into soils by farmers who used the product in lieu of potassium chloride (KCl) fertilizers. A total of 138,241 tons of chloride has been prevented from being applied into soils by Verde's customers since the company started production.

"Regarding the progress of our carbon capture project, we are excited to announce that we will soon provide updates on the commencement of field monitoring for the CO2 captured through the application of our products. ERW initiatives seeking to generate carbon credits must present their carbon removal quantification methodologies to certification bodies, following strict criteria and guidelines. Therefore, starting the monitoring of our product's carbon capture is crucial to validate the measurability of the credits generated from its application to soil, ensuring full compliance with the stringent standards of the carbon market. Additionally, we are thrilled to announce upcoming results that compare the carbon footprint of KCl with K Forte. This comparison could reveal another significant opportunity for farmers to not only reduce their own carbon footprint but also potentially capture millions of tonnes of carbon, further advancing our commitment to sustainable agriculture," concluded Mr. Veloso.

Carbon capture potential

Verde's products have a carbon capture potential of 120 kilograms CO2e per ton of K Forte. The life cycle assessment (LCA) calculated the product's carbon footprint from cradle-to-gate at 7.44 kg CO2e/t. Therefore, the company's net carbon capture potential covering activities from raw material extraction, processing and production can reach 112.56 kg CO2e/t.

The greenhouse gas emissions associated with the cradle-to-gate cycle of K Forte are relatively low, at less than 10 per cent of the amount of carbon captured by the product. This can be attributed to Verde's sustainable production processes, noticeably the 100 per cent use of renewable energy (hydroelectric) for the processing plants.

When considering the cradle-to-grave assessment of the product, which includes the final application of products by farmers, the shipping distance between Verde's production facilities and the application site influences the range of greenhouse gas emissions within Verde's supply chain.

Between Q1 and Q3 2023, the company sold 323,000 tons of product, which have the potential to capture up to 38,760 tons of CO2e. This amount could result in a potential 20,936 tons of CORC, calculated within the LCA and inclusive of shipping emissions.

Carbon credits for ERW are currently being negotiated in a range of $138.78/t to $563.9/t.

The attached table shows the CORCs derived from the cradle-to-grave life cycle assessment and market size for K Forte, according to the distance radius for the product's shipment from Verde's production facilities.

Subsequent events

• In October, 2023, the company appointed Lucas Brown as its new vice-president of corporate development. Mr. Brown is leading Verde's expansion into the carbon market, in addition to overseeing the company's institutional and investor relations. He has dedicated a decade working in Brazil, in the last four years serving as the British Consul to Minas Gerais state.
• In October, 2023, the company announced that it has secured $16.2-million in debt financing facility from Banco do Brasil S.A. and Banco Bradesco S.A., the two largest Brazilian banks. The funds raised will be used to replace existing debts that were at higher interest rates and provide the company with more favourable terms, including six months of grace period for Bradesco's loan and 12 months for Banco do Brasil's loan. This will enable Verde to offer financing solutions to potential customers, whilst fostering growth and financial stability. The financing consists of $10.8-million in debt from Banco do Brasil, Brazil's largest bank, and $5.4-million from Bradesco, the second-largest financial company in Brazil. Additionally, Verde currently has $20-million preapproved credit with banks in Brazil.
• In October, 2023, Verde announced the results of its first life cycle analysis, completed by LCA Design Corp., a leading Canadian consultancy firm. The LCA determines the climate impacts associated with the production of Verde's potassium fertilizer K Forte from cradle-to-grave. The LCA was conducted according to ISO 14040/44:2006 standard and Puro Earth enhanced rock weathering methodology.

Market outlook

The market outlook for agricultural inputs, particularly fertilizers, is cautiously optimistic. Key trends and expectations shaping this outlook include:

1. Stabilization of fertilizer prices: The global market has witnessed a stabilization in the prices of KCl. This trend is expected to continue, providing a more predictable cost environment for fertilizer production. The stabilization of KCl prices is particularly significant for Verde, as it could lead to more stable pricing strategies and potentially improved profit margins.
2. The market also demonstrates a returning stability in urea, MAP 11-52 and sulphur fertilizers prices following last year's volatile scenario.
3. Steadying of agricultural commodity prices: After a period of fluctuation, agricultural commodity prices are showing signs of steadying. This stabilization is likely to positively influence farmers' investment capabilities in agricultural inputs, including fertilizers.
4. Brazilian economic indicators: The Brazilian Central Bank's recent reduction in interest rates, with the potential for further cuts, could alleviate financial constraints on farmers. This would facilitate their business development and acquisition of essential inputs. Should the SELIC rate decrease to the anticipated 8.5 per cent, Verde is projected to benefit from interest expense savings of $1.1-million by the end of 2024 and $2.7-million by Q4 2026.
5. Global potash market dynamics: As a major potash producer, Verde is well positioned in the global potash market, particularly with Brazil's reliance on imported potash. Verde's domestic production capabilities place it favourably to efficiently meet local demand.
6. Focus on climate change and sustainability: As the global shift toward sustainable agriculture gains momentum and environmental impact becomes a critical evaluation metric, Verde's commitment to sustainable fertilizers and its carbon capture initiative positions the company favourably in response to this market transition.

Selected annual financial information

The attached table summarizes Q3 2023 financial results compared with Q3 2022 and year to date (YTD).

External factors

Revenue and costs are affected by external factors including changes in the exchange rates between the U.S. dollar, Canadian dollar and Brazilian real along with fluctuations in potassium chloride spot CFR Brazil, agricultural commodities prices, interest rates, among other factors.

Q3 2023 compared with Q3 2022

EBITDA and EPS (earnings per share)

The company had an EBITDA of negative $600,000 in Q3 2023, compared with $8.2-million in Q3 2022. This decrease can be mainly attributed to the factors herein, outlined in greater detail within the market overview section in the original version of this news release:

• Increased bad debt provision: The increase in bad debt provision has increased the general expenses, further impacting on the company's financial position. In Q3 2023, the company recognized a bad-debt provision of $563,000, which exerted a considerable impact on the general expenses and, consequently, EBTIDA. As outlined in the market overview section, 2023 has proven to be a demanding year for the agricultural sector, however, the company is currently in active negotiations with these clients. If the negotiations are successful, the provision will be reversed.
• Potassium chloride price decline: The average price of KCl CFR Brazil experienced a substantial 59-per-cent decrease in Q3 2023 when compared with the same period in 2022, with a 34-per-cent decrease from January to September, 2023.
• Extreme market conditions and working capital constraints: The current agricultural market scenario is characterized by extreme challenges, including working capital constraints for Brazilian farmers due to low agricultural commodity prices and financial market instability. Farmers are encountering difficulties in financing planting activities and are opting for extended payment terms with competitive interest rates from suppliers.
• Intensified competition and financing conditions: Larger international competitors benefit from lower financing costs within their countries and possess larger balance sheets. These advantages enable them to extend more appealing interest rates and favourable commercial terms to farmers when supplying products, giving them a distinctive competitive edge. Verde's capacity to offer competitive credit terms to farmers encounters limitations due to the company's higher cost of debt compared with these well-established competitors. This financial discrepancy impairs Verde's ability to match the financing terms offered by its competitors, impacting its appeal to farmers seeking more favourable credit options.
• Sales price and volume: Verde's average sales price per ton had a decrease of 40 per cent in Q3 2023, in addition to a 43-per-cent decrease in the sales volume. This was mainly driven by the lower potassium chloride prices and additional discounts provided by the company, aiming to increase market adoption.
• Shift in product mix due to constrained working capital: With many farmers facing restricted cash flows, there has been a noticeable shift toward opting for lower-value-added products. Consequently, the utilization of micronutrients, which do not fall within the essential NPK elements for plants, has witnessed a reduction. This shift has culminated in a decrease in the sales proportion of BAKS, Verde's higher-margin product, from 11 per cent to 8 per cent in the third quarter of 2023.

Liquidity and cash flows

On Sept. 30, 2023, the company held cash of $9,275,000, an increase of $4,221,000 on the same period in 2022.

Q3 2023 results conference call

The company will host a conference call on Wednesday, Nov. 22, 2023, at 10 a.m. Eastern Time, to discuss Q3 2023 results and provide an update. Subscribe using the link in the original version of this news release and receive the conference details by e-mail.

The company's third quarter financial statements and related notes for the period ended Sept. 30, 2023, are available to the public on SEDAR+ and the company's website.

About Verde Agritech Ltd.

Verde is an agricultural technology company that produces potash fertilizers. The company's purpose is to improve the health of all people and the planet. Rooting its solutions in nature, the company makes agriculture healthier, more productive and profitable.

Verde is a fully integrated company: it mines and processes its main feedstock from its 100-per-cent-owned mineral properties and then sells and distributes the product.

Verde's focus on research and development has resulted in one patent and eight patents pending. Among its proprietary technologies are Cambridge Tech, 3D Alliance, MicroS Technology, N Keeper and Bio Revolution. Currently, the company is fully licensed to produce up to 2.8 million tonnes per year of its multinutrient potassium fertilizers K Forte and Baks, sold internationally as Super Greensand. In 2022, it became Brazil's largest potash producer by capacity. Verde has a combined measured and indicated mineral resource of 1.47 billion tonnes at 9.28 per cent K2O (potassium oxide) and an inferred mineral resource of 1.85 billion tonnes at 8.60 per cent K2O (using a cut-off grade of 7.5 per cent K2O). This amounts to 295.7 million tonnes of potash in K2O. For context, in 2021, Brazil's total consumption of potash in K2O was 6.57 million tonnes.

Brazil ranks second in global potash demand and is its single-largest importer, currently depending on external sources for over 97 per cent of its potash needs. In 2022, potash accounted for approximately 3 per cent of all Brazilian imports by dollar value.

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