Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coromandel International Ltd (BOM:506395, Financial) reported a strong recovery in the Southwest monsoons, leading to improved agricultural conditions and higher reservoir levels.
- The company saw a significant increase in phosphatic consumption, with NPK consumption up by 42%, indicating a positive shift towards balanced nutrition.
- The new sulphuric acid plant at Vizag is operating close to full capacity, enhancing backward integration and generating capital power from Waste Heat Recovery.
- The Crop Protection segment saw a 5% increase in volumes, driven by growth in both technicals and formulations, with 10 new products introduced in Q1 FY '25.
- The company has received all statutory clearances for its proposed phosphoric acid and sulphuric acid plant in Kakinada, with major orders already released.
Negative Points
- The consolidated total income for Q1 FY '25 decreased to INR4,783 crores from INR5,738 crores in Q1 of the previous year, mainly due to lower subsidy rates.
- The consolidated EBITDA for the quarter dropped to INR506 crores from INR709 crores in the corresponding period last year, impacted by lower NBS rates and increased raw material prices.
- Subsidy claims received during the quarter were significantly lower at INR987 crores compared to INR2,069 crores in the same period last year.
- The company continues to face price pressures in the technical export market, particularly due to dumping from China, affecting margins.
- The new technical plant for DMPAT will only cover 20-25% of the company's requirements, indicating limited immediate cost savings.
Q & A Highlights
Highlights of Coromandel International Ltd (BOM:506395) Q1 FY '25 Earnings Call
Q: Can you elaborate on the cost-saving initiatives in the Crop Protection segment, particularly the transition from DMT to DMPAT and the War on Waste initiative?
A: (Jayashree Satagopan, CFO) The transition to DMPAT and the War on Waste initiative are part of our efforts to secure raw materials at the right price and reduce costs. The DMPAT plant will be operational in six to eight months, covering 20-25% of our requirements. The War on Waste initiative has helped us identify cost-saving opportunities across various functions, which has been crucial in maintaining competitiveness.
Q: What is the outlook for NBS rates and potential price increases in the nutrient business?
A: (S. Sankarasubramanian, CEO) The current subsidy rates are valid until September. Given the increase in raw material prices, we expect the government to adjust NBS rates for the Rabi season to reflect these costs. This should help absorb the increased input costs.
Q: How is the Crop Protection business performing, and what is the impact of price pressures?
A: (Jayashree Satagopan, CFO) The domestic market is stabilizing, and new product introductions have improved margins. However, export prices remain under pressure due to competition from China. We expect this to stabilize in the next one to two quarters.
Q: What is the timeline for the BMCC Senegal JV to become EBITDA positive?
A: (S. Sankarasubramanian, CEO) We expect positive traction in the second half of the year as we stabilize production and integrate the material into our Vizag operations. The plant commissioning is underway, and we aim to complete trials by the end of September.
Q: What are the company's plans for expanding sulfuric acid capacity and its impact on imports?
A: (S. Sankarasubramanian, CEO) Our new sulfuric acid plant has reduced import requirements by 30-40%. Once the new capacity is online, we will still import 2-3 lakh tonnes annually, down from the current 6-8 lakh tonnes.
Q: What steps are being taken to mitigate the impact of lower subsidies on profitability in Q2?
A: (S. Sankarasubramanian, CEO) We are focusing on efficient procurement, improving captive production, and blending our own raw materials. These measures, along with potential government support for increased costs, should help improve margins in Q2.
Q: What is the outlook for raw material prices and nano fertilizer volumes?
A: (S. Sankarasubramanian, CEO) Raw material prices are relatively stable, with some hardening in ammonia and potash prices. We have positioned 10 lakh liters of nano fertilizer in the market, and we expect increased traction in Q2 as consumption starts in mid-August.
Q: What are the company's growth plans for the next two to three years, particularly in Specialty Chemicals and CDMO?
A: (Jayashree Satagopan, CFO) We are focusing on expanding our product portfolio in Specialty Chemicals and leveraging our capabilities in CDMO. We have dedicated teams and infrastructure in place, and we expect these initiatives to contribute significantly to our growth in the next three to five years.
Q: What is the expected substitution rate for nano fertilizers in the next three to five years?
A: (Jayashree Satagopan, CFO) We expect nano fertilizers to substitute 20-25% of the domestic demand for DAP and urea over the next three to five years. The initial response has been promising, and we are working on increasing farmer adoption.
Q: What are the company's key focus areas under the new leadership?
A: (S. Sankarasubramanian, CEO) We will focus on sustaining value addition in our core business, expanding capacities, and growing our non-subsidy businesses like Crop Protection and Specialty Chemicals. We aim to improve overall EBITDA margins and explore new opportunities in phosphate-based value-added products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
