Sadot (SDOT) 16 May 242024 Q1 Earnings call transcript

[Audio Gap] [Operator Instructions] Before we get started, we would like to state that this call may include forward-looking statements pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. To the extent that the information presented on this call discusses financial projections, information or expectations about the business plans, results of operations, products or markets or otherwise make statements about future events, such statements may be forward-looking. Such forward-looking statements can be identified by the use of words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans and proposes.

Although management believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors in Sadot Group Inc.'s most recently filed Form 10-Q and Form 10-K and elsewhere in documents that Sadot Group Inc. time SEC. to time from with the files

update Forward-looking the contained, document only required as by duty and may except date of of the to any in undertake Group law. does statements forward-looking be Inc. statements, as speak Sadot not any which they are

company's Sadot those the Chief noncontrolling Group the to filed Chief will Jennifer Sadot to presenting related Michael linked over Officer, this interest. Roper; Executive Inc's May and on rounded Roper. from the under associated For Group Sadot closest would me portion to amounts the SEC's this On Inc. rounded percent call, Sadot Michael report all on Sadot refer point, are Officer, XX, may like and thousand, it unless Michael website, to Group's website Jennifer company. With Black. disclosed Group related Inc.'s numbers and closest all Group to and noted, numbers the will the in disclosed percentages are been I otherwise on Inc. have Financial exclude Group's Group the and today at sadotgroupinc.com turn to the the or the this prepared website on Michael? documents to financials be remarks found Sadot feeds the Newswire call, have be with tab. At Sadot call as and XXXX, been we Investor this and

XX, us of first present results morning, Good our today for everyone. March as ending operator. Thank we joining Thanks, you quarter the XXXX.

improvement to XXXX XXXX. approximately QX to XXXX, net a loss for $XXX our resulting revenues approximately The of in a $XXX,XXX ending of net company March as loss net the considerable million QX $XXX,XXX, XX, improved approximately quarter loss $X.X million XXXX. compared a of had by QX compared For

$XXX,XXX marking challenges in the In from a Jennifer improved, our shortly. Overall presented addition, discuss the here first in quarter $XXX,XXX, of detail of the in XXXX. a showing a conditions positive QX. financials EBITDA EBITDA the further loss XXXX shift Black, gain will market sector agri-commodity company's in CFO, QX

largest One was absence market. the challenges in China's wheat the of unexpected

pause largest on material a buyer the of market. As had wheat, China's the on wheat world's impact

total the see we seasonality saw agri-commodity a for In addition to we also expected challenges, in of prices able QX. in net did Sadot total areas income, overall our revenue working improve and in surplus. capital situation, assets of China were softness our our to to Despite the we improve our reduction with these factors. Because Group drop other improve increase combined revenue EBITDA, business, our

the the we believe market showing may in headwinds begin and QX. on to is indications that subside Importantly, revenue QX

As month on through already April division. I to am of improvements, to of worked $XX our a has while initiatives. operations pleased QX coming million revenue the we fact, made to X with the XXXX we for pleased matter report of manage revenue announce I headwinds, for of that am trading in significant shown strategic progress the Agri-Foods that

the Sadot will these and approvals and no diligence to corporate and signing LOIs the phases. The diligence a respective of resolution satisfactory guarantee issues, final definitive to completion Pokemoto and of a the the definitive in of sale. of the parties. in due negotiation transactions segment. sell and Group's nonbinding First, satisfactory completion QX, negotiation business of or mutually by that legal There any a result buyer, assets by is sale to we initiated Services agreements agreement are these we their subject closing due sale Foods. the Superfit signed for in are process subject remain conditions Recently, Both and of customary

overall to to Bunge. the in operational trading to Second, play management. of global managerial company's at Prior and Latam, trading and trading decades he consultant agri-commodity and over Fausto X in Sadot experience Fausto global the brings with Plaza, expand manager powerhouse, the Sadot, operations. and held farm role of role plan a we significant positions

de made of office products X expected shipped to trading to Sa, new began experienced the headway trade, have the international Paulo Brazilian the subsidiary Brazilian and region harvesting metric team short with globally. Fourth, in under agreement has with Brazil a with opened in substantiate In Republic team seasoned Led significant which our the upcoming revenue Zambian national and time by we establishment, de traders, and multinational sourcing of safeguard banks. in aims of in financing to agri-commodity both actively in expect tons the to by efforts date the harvest itself operations established from was a agreement to executives support security. come we QX. This sourcing X,XXX from late and Agency, and corn we Sadot's the government's Reserve since expand food Food Zambia. Third, the Flavio online Campos

expect from into of majority We agreement potentially in and realized the QX revenue to this be the QX.

providing and moving million approximately Sadot we Lastly forward. finalized financing various in with with trade terms for us importantly, institutions, $XX operations Agri-Foods

pursue enough to to of financing. I past, will discussed financing trading opportunities, our how potentially trade Group and trade growth. growth increasing bottom with net enhancing line top for access to our margins of facilities top Sadot the the revenue flexibility is we such thereby us capital goal are margins provide cannot our financing Access the to more our the important of hinges company's Sadot these agri-commodity to operations. the income. our with to financing trade emphasize and increasing directly Agri-Foods immediate The line line As on linked in access growth revenues

trade our support on growth working obtaining lines more actively initiatives. to are further finance We

over XXXX. specifics for I'd like financial quarter to the the our review company turn call Jennifer performance Black, to Now more first the of CFO, Jennifer? of the to on

Thank you, Mike.

the SEC like With day. with release like ending that, yesterday, with the our filed the results March an May financial along overview of for that financials press begin, on to XX, the the first XX, XX-Q I I'd I'd Form XXXX, XXXX. Before on same to were give for quarter of XXXX, note the quarter

improvement his reported we comments, improvement in company's net in approximately an a loss reported net by opening operations. $X.X year-over-year. mentioned of compared of net an XXXX million. on $XXX,XXX, a to Mike This Agri-Foods million QX by As approximately the and loss for loss We of $XXX,XXX revenue revenue of approximately business Services generated $XXX Sadot segments, two Sadot our Food the was

of positive first EBITDA quarter our $XXX,XXX, showed XXXX a QX in XXXX. $XXX,XXX from gain the a loss shift Additionally, the marking EBITDA of

XX the LLC trading farming and countries. Sadot also Sadot QX depending from on QX majority weather different in XX across the XX contains line. current in transactions Sadot Sadot in be of first Agri-Foods segment The million were contributed the the expected Agri-Foods. revenue harvest first our These from in Agri-Foods revenue realized Latam in $XXX.X Our is business and Sadot completed quarter completed potentially to season, conditions. farm with harvest is QX into operations. and transactions

tons is X,XXX first corn farmer to its been and We XXX metric that to just metric of deliveries. tons soy of have delivered have now pilot harvested over contract and program starting date customers, our

Food Our second is Sadot business Services operations. segment

the locations the sale before, March during million Pokemoto to revenue March $X.X of ended in held financials. In corporate-owned the various to began Services it disposal ended conversion company quarter certain was XXX-XX. three locations Accordingly, the prepare group As was of company's this marketing Mike meets the QX, XXXX, $X.X sale million as due Food the actively requirements this months mentioned XXXX. was Sadot This and classified for of the compared division's to of that for the a to for as decrease three identified the food XXXX, divestiture. service concepts ASC for XX, months XX, mainly franchise first

to Sadot Group. the picture me let financial Now turn of overall

of company working to million XX, $X.X million of surplus and the XXXX, balance working had of of This a XX, cash surplus cash $X.X respectively. of million March and a a December XXXX. $X.X compares $XX.X a capital as As capital million, of balance

deploying balance current position our sustainable in to enhance financial with strategically our Our to drive and is growth. capital cash commitment line

in in the assets grew This significant same time property from due total was the receivables. Our $XXX.X our million to increases quarter current assets other equipment, $XX.X first accounts in XXXX. and and million in to

$XX.X primarily to XXXX. to totaled to March and trades. Stock-based expense corresponding March payments timing for XX, expenses consulting a of is was assets million the XXXX. the net the Aggia, to in to renegotiated related months of expenses of payable Sadot XXXX. the months is for fees compared the on stock-based Based from XXXX, ended in This million receivable XX% total for investing XX, in million XX% that the due decrease the December approximately The calculated three from $X.X consulting on is $XXX,XXX result did fees decrease Aggia income accounts $X.X restricted XX, ended This Agri-Foods, stock Aggia accounts Sadot's Our three Agri-Foods are XXXX. in by decrease at is service due generated paid with issued agreement in the which the segment.

soybeans developments significant farm. We for while we've on the with derivative I'd strategic in in the strategic $X.X the agreements. agreements, is credit million capital QX, have call These sales have bolster balance of are these our can sales increased The to approximately internally sheet, XXXX. It made Roper. carbon and forward into grown streams, working over gain on important purchases one two are we in to We our for of income the into in future. building be entered to currently mark-to-market sheet, resulted our that, the forward we all part operations. With our turn Sadot back and the have for strong into note the business Michael sales of transactions delivered the hedge changes, we As and purchase company. Agri-Foods, fortifying like an revenue to we also agreement that QX forward to soy balance agreements enter making sales transactions these plan achievement offset, and enter reflecting investments several surplus, for and forward

you that financial Jennifer. Thank for overview,

our the for food we challenges the vision: markets, We remain global continue our that dedicated the solidify and we face executing and adhered global challenge control global course chain. our strategic the seizing supply offered and presence participant the agri-commodity in the and vision With plan by company. to foundation we strong our we the beyond building we and some While every quarter, supply required in a stayed believe this overcome, significant chain. for our factors opportunities to strong strategic

want while are today legacy I restaurant to Thank exploring divest and investors options us ahead and stakeholders that, again lines we once gratitude open look trust our brands. In our we actively for for success support. to Inc. joining continued delivering stakeholders please We in moments and we Additionally, Sadot serve. With a Group your continued give investors, closing, us forward communities your in to the express exciting you for my questions. up for the few to our for journey all the

like Before analysts, we selected the questions from received have get stakeholders. Jennifer? questions we would to some which to address from team our our

would Thanks, a like through few operator. We to run questions. now

We're limiting operations ourselves terms QX The payment temporary our versus we shift roughly this secure decrease first resulted to our question XX% in in as and be decrease of more model. extending adjusted strategic on structure. a reduction revenue revenue XXXX did in clients. XXXX? Well, credit QX can business in attributed the a why towards our sales a transitional volume to This renegotiated by with is, effort buyers quarter's in

for credit risk it reducing has strengthened growth foundation more and short-term stable future. a our has and the revenue, this impacted our While it predictable by positioning in financial

In underlying commodity record a a market world's is and considerable sales decrease the as decrease most XXXX, Department U.S. XXXX. in several wheat and March China largest U.S. dating importer, factors of tons of that, China and XXX,XXX wheat less that the To The had of at from there cancellation this of largest to prices. China by XXXX the in to to overall equivalent figure is lower sales to on prices. canceled. sales the back had the factor important reported considerable a demand shipments China were grain total revenue. in This in resulted impact Agriculture was marks in to on been addition quarter's perspective, put and this all half in about

Asia, Nikkei related indicates swing Our domestic last which large-scale to decreased from grains In appears experienced the summer, their contracts China flooding be production. response, by from other analysis, significant China secured reporting countries. high-quality this that for to supported

and fulfilling future. recently in emphasize But Brazil to of are Sadot QX, of be starting lower Dubai. Moreover, additional additional We it trading costly one formation market, buyers However, of global of trading revenue previous Sadot open more appears we reset I normal view year, establishment types operation anomalous markets. that avoid a issues as some now domestic periods to exploring and of want we to time as agri-commodity revenues actually the anticipate as with is, reinforces into this strategic supply already and trying return temporary we've will are and to done prices, Latam opportunities historical of we commodities April the the expansion our instead to additional a centers we're remain disruption to are recently from with million. repurchasing actively Singapore contracts causing expand to trading more markets temporary its our as really patterns the to due vision an trading see our increasing and the entities reported to roughly last return. This and $XX the existing indicated, at

So to starting rebound. see already we're a

why expected we in moving and we than quarters? than guidance should question market. expect second be provide to the lower previous The don't margins normally due had what on margins forward? Well, to we were the future volatility lower margins And is

the previously trade same stated earlier on due market margins However, call. to narrowed the factors

commodity As from forward. to market a the and a commodity margin in China, resulted going diversification with increase squeeze. We positive global our potential drop, it on along the believe create strategy demand has prices expansion

question. Next

With the above raise on is plan they NASDAQ $X? And the share extension, strategy. the implementing so we're multifaceted company's are look, how to a going what price

financial our strategic the health enhancing aforementioned shift. and First, we're operational efficiencies through

and to communicate efforts better plan investor proposition potential. and to market relation our future our value visibility we increase Second,

that Additionally, we're acquisitions growth potential drive our exploring partnerships which can investor confidence. strategic with core align and business, and

critical and demonstrating driving company business is The and in believes strategy, our against strategy in growth. results executing this

allow accurately and believe help company. capital important that fresh will an driving also company in We on restaurant factor the corporate of solely reducing divestiture will aid the to division also overhead. overall, in the model focus the bringing be the while services This agribusiness valuing

them received believe value the key LOIs, next of communicate line to next our will and earlier, the of lot terms phases question our are proposition the focusing The Foods? While chain. -- terms significant we on Superfit supply Pokemoto agri-commodity diligence the to existing future nonbinding better teams process, additional and from reach can't one expectations. to out Once of all still and towards are team is they to here. mentioned that operational of potential. The is the and and next the sold, we restaurant with due expand the the that together another which necessary, Again, sense in for restaurant the question to nonbinding we're there's the are So a that, we sales is where sale use we under bring verticals, on go what methods LOIs the chain. in right, various how as with I'm going trying discuss the members So one terms tools mark to will global to on focus put market sale make other the impact our can transition company? supply be our

a future enabling manage offers basket reducing stable external approach dependency contracts more operations. supply advantage leverage both me it the broader It's with and let of diversify synergies mitigating supply in regarding us trading expansion? So business Furthermore, revenue farming. And is advantage? a the a current our jump And doing question. of Why streams aligns risks. us the agricultural effectively. will suppliers and is by part into the on So involvement materials, Farming strategy to strategic farming? chain company there strategic is by and farming what providing raw our to our be next within

farming in This and growth see enhance as especially presence mix. expansion, As our we will these into integrate our for significant we potential scaling activities create operations, opportunities. the market additional overall

we recognize In market income we like the prepared. In commodities. This have adding trade underlying to sales to a have commodity fluctuations. our agreements. ability round addition, we year that's as the case beyond in with these agreements open roughly forward in the able negative, collateral, $X.X in farms the mentioned farm all call, on more over market future time build into the vertical this as using QX, company the questions sales up Zambia to to insulate to from anticipate million as forward believe it Operator, earlier enter segment. I We on help us company turns allows the to analysts we call. for we'd the were

team. open questions. Thanks, would AGP I like Yes. the with Aaron for to to call first Grey

So first me. one for

from We're speak there April any little how you're to of not the from $XX terms at rebound doesn't within $XX whether And the including any just million, May through Or China? makeup also China is that come million, we a purchasing able or can from date? now. halfway better of that sell, that? month the their on think of rebound a habits. bit Just get to of about to you back Trying in China what not of rebound picture run rate, was should

I'll chime then in Aaron, Jennifer and can here. start, Yes.

Let about of mistaken, China for I did talk month month China trades in of don't I'm the to have right? really, if April, me think the the We side not any of had equation, we April. right, not -- the

different shift So all Latam, and around into to into everything seeing things. parts which and is of do we you're is and the allows Brazil, expanding to moving we're us that around why expanded world, us

here online starting that's those we coming take We QX April instantaneously, QX. into just think markets. can't of why it start the China that so rest effect do and in will through as back like into other moving overnight, Now start you you to see

that I apologize. question? What the part was of second

month-to-date, continue. that May kind of just if towards momentum Just

through XQ, halfway Now right? we're

of those comes And month. finalize process until usually, time. it that the the kind take the and trades, in When to the accounting half close out second those of don't of Yes.

an where depiction to now way the we are of right give happen. So accurate time for I can't of those the you involved in because accounting

as said, through at at will do QX. we So to as as it anything I the moving down we China that numbers, well, I emphasize stage stage, this coming right? doesn't to want keep April and China when Sorry, or this QX see be really involve from

of coming from also we happen end think have beginning May somewhere trade June, Brazil Brazil However, where our of will in online, we there. first

definitely from general, is the that to come -- So going to in going start of QX. harvest the seeing in QX, online. And farm, be you'll then within most it's

Some of of that -- weather, around, have rolls how but so control you some quarter. that. could of kind in on for spill into do QX good momentum coming depending rest the But the I that can't

like do first been it greater to X% know a was trade it year. the for That's gross get bit we getting margin of in it the side, be what's own alone, just far how away quarter, X last and that about And of had you in things your margin a considering more just probably talked margin transitory than about how quarter. on driving the point more Okay. the the the farming, of including it the and then Agri-Foods, helpful. slight noticed environment. gross the little are sounds range less include terms half positive. But I We pressure, margins? we looks it prolonged from some I like and negative -- might to a overall

to are how it near be in least? lower margin at going this for we returning the far that? levels Or So to term, away from

container-type right, they're your lack ships, trades have trades types trades definition. A right? containers, I trades to of there's is the of like it's your got China for were are as the large were which right, the ship in the smaller about small right? and past, to smaller Well, entire and we -- are more a of talked better trades, going trades. very that margins into trades, So tend lot larger large part -- than so we've not of scientifically, X cargo You've the think it key of the orders

potentially through have and be But start beneficial. start the some things, some start Latam if into commodities it as of again, that's container can other on different do better compounding that can't of and and So more seeing into smaller commodities expanding to okay? that. more to we into type world, shift trades And do that margins, start the increase we the type you Brazil those the play. might different that parts as with trades start wanted things get types They overnight, we're of margin to changing in should you we of those. Then generating coming these those that you

of in see type to into QX, As some like sunflower of come a starting and are seeds there. right, commodities fact, of part and play into matter QX now other things, we're that those

margin that the with the farm it's with the exactly, of you have different we to and think on, see us hard running there. volatile combine But and predict out other we going we'll it operations initiatives increase. So obviously, markets getting some that are some up for

me. And helpful. then last question for That's Okay.

doubtful of balance terms like is to, and type of like to that any sheet doesn't accounts of have? in causing down. of guys there's I reference trends look Just potentially you there's rationalize that came It kind your of it the you mean on AR you -- base, customer made and some a issue there the credit some AR

made? commentary expand that could on that So you just you

Yes, absolutely.

we no, you this overextend. don't have But don't want what any AR right now you don't at is to do time. issues So to want

credit don't and -- time customers, your customer don't I checks much at want the just make one over KYC too sure checks to the liability your have to do want for state you one your company. and you to outstanding of You mean

position. our at set look to just have and a a the minimize one at we're risk that sure customer and those we to make And good so only -- outstanding made limit amount closely and to have to in we sure time,

Now I'd Zacks. like Kerr to open call the to with Tom

more large are is those business? and to disproportional your of the effects overall sort China you the that the on business Are One referring a the part we China derivative China Or more wheat business actions? business. of clarification of implying

Yes. little both. I guess a maybe of

with today commodities and soy that by So that it that not we portion trade be the big China Brazil, that other comes out is parts alone, out So that wheat wheat wherever, place a can trade of our right? trade. parts things. right? So there's corn, of just though, of the of we is on comes the main wheat have of what only we we wheat, world, different There's right? world,

didn't where it it So are at. things lag totally ] up [

like you you look the trades Yes. And our look when into QX did, at different XX% countries of of over this were we in world. and trades our wheat year throughout that

first And commodities? do then Cocoa ability other all quickly? on that you have just the was to What into other note, relatively Because declined the have of do strong. strong, was flexibility [indiscernible] beans not sort to you commodities in go commodities explore quarter.

and started I into why those there It's -- bring are a also There's as just into X trading expertise And them. in top on that's commodities traders down expertise, right? the to determining, their the doing start plan those others not and we routes, going, that strategically remember individual we to sunflower, expand us suddenly in so I said, tomorrow." Your trade but We're So was some can't okay? you you countries you ability's on get stuff, to really straightforward And personnel fluctuations right? you these up these started to though, arms. want where. on There's of It's expertise are Yes. want going commodities. what trade different of what to there. into, as it's to couple different off in commodity your going "Hey, and experts as and We on into to my commodities it to this got move like just whatever start not or right? as to be areas, different there get head other

into to shift things, week. So but we have think next I commodity X to do people yes, the into those shift want I don't whatever ability can

process got only and with geography the not and with then well. into with did areas, a looking you in or do we're have wheat, and constantly right, as from bring exactly other to integrated say, extensive then them that to and Brazil But on out got there. also company to Those do. You've you doing the big what Latam, we the whatever. But team to we're the the a that's but ones purpose at get soy. if we around are are commodities corn Because things main more and the basket, want ones, of started to obviously, want trade we of the

a sense. sense. revenue? how that makes do it's gets like Or the a how That is you out made $XX that translates figure the $XX trade that on of financing, it. So Got we million, million financing is So into $XX And not trade for there where million derivative one-to-one that, revenues? it, expands? I hope

not a get like up set are extended all to based Most and $XX the buy these direct, million, the stuff these of done. of that all They're just terms So us here's differently. give purchasers like work trade and it. off transactions go lines

isn't a there saying. So were like one-for-one you

those funds, margins which of in there. should and However, does increase do trades can the with revenue additional generate we significantly that it amount

and One in I'll for get me, back more queue. the

you talk about business? at say you On can't you cash in restaurant of Superfit agri proceeds done, the that least I invested and business, the the are terms be the that can if know but Pokemoto expect being can

Yes. Will you [indiscernible].

what Cash distributed. I that's he proceeds will believe said. be

No, in I was, was what out question trying reality. figure just your to

to fresh would of the thought the business, be are expanding, -- whether in right? the which we capital right, to we been We're And it's it to it's scenario agri allow We come since invest right? And side able is, thought. idea right, that's in agri allow business right, right? right? into bringing more this personnel, LOIs, the the it's it in, pivot, happy did business, it's brings terms acquisition, whatever focusing general, which there our just going -- us of in going us to sale where thought of the has it where that, the So whether whether nonbinding with strategy we it, is focus into on in the model, the start so is an the really to on to whole coming in

just you was to in. trying how coming [indiscernible]. is give me get to I going much to cash be

this do talk. single every we You time

sale? on Grill Or up there mentioned. Last one Maker is wasn't still plans issue? that? Or that a Muscle for is Is for that separate that,

No. Yes.

We when Superfit So same X is just Pokemoto, the the kind Superfit Maker there, in time. the Foods Pokemoto one. focusing and operations, there's restaurant main we at largest came Grill along that of at Muscle divisions first. look Foods. on right? started

Just you pushed yet. right? We necessarily Grill kind Muscle if say, of haven't to happened, want Maker actively

Although we we're party interested stage we're there. have interest that's talking do to, at do not But with the yet. out have LOI an we some it that

as complete well. focusing these as side we'll other So as soon start the transactions, Muscle then Maker on Grill we

That final any concludes Roper, Mr. our comments? Q&A portion of the call.

QX. Yes. Other just letting did look, everybody know, a than in have challenge we

worked in and think we other things had came income there for that around way EBITDA our I positive quarter from best we all we it results some talked as different and the net could. We those that about.

know We go. that we're from plan. encouraging we where pretty executing it's against know so perspective. We our want to And

do I in just consider look having And shareholders, I company. investing brings. near to stakeholders, pretty that in We everything the forward there. future and We And us out that, confidence what ourselves a us, in about confidence it. are the happening have all and community, quarter the there. next that's for out in all Thanks excited growing appreciate investment

That Thank call. our concludes you, everyone.