Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chambal Fertilisers & Chemicals Ltd (BOM:500085, Financial) achieved a 31% growth in EBITDA, reaching INR 942 crores compared to INR 778 crores last year.
- The company reported an 18% increase in PAT, amounting to INR 552 crores from INR 469 crores in the previous year.
- At the consolidated level, the company registered a 32% growth in PAT, reaching INR 448 crores compared to INR 339 crores last year.
- The crop protection chemicals and specialty nutrients business showed strong growth with better margins, launching eight new CPC offerings.
- The company has zero debt, having prepaid its long-term loans, and received about INR 2,300 crores in subsidies in the first quarter.
Negative Points
- The company faces risks associated with forward-looking statements and market conditions, which may impact future performance.
- There is a dependency on government policies and subsidies, which can affect the company's financial stability and margins.
- The company's urea business, while progressing well, is subject to fluctuations in ammonia and urea production plans.
- The crop protection and specialty nutrients business, despite growth, faces challenges in maintaining consistent margins due to market dynamics.
- The company's plans for entering the hybrid and research variety seeds market are still in the early stages, with potential uncertainties in execution and market acceptance.
Q & A Highlights
Q: Referring to your slide for the 110 metric ton per day increase in production capacity for G-I, G-II combined, would this mean that you can make more urea with the same amount of ammonia?
A: No, there is a particular ratio to urea to ammonia. That chemical composition does not change. What it means is that the background ammonia itself has increased to that extent the throughput. (Abhay Baijal, CFO)
Q: What has driven this 40% growth in contribution profit for CPC and SN?
A: This is an approach of iron ore and advanced placement scheme, which is yielding results for Chambal. Additionally, the way we are choosing our products has led to good growth in overall revenue and margins. (Ashish Srivastava, Assistant Vice President - Marketing)
Q: Can you provide an update on IMACID? How is IMACID doing right now?
A: IMACID is doing well with improved realizations due to softened input prices and higher production compared to last year. We expect this situation to continue, subject to global DAP requirements and production stability. (Anand Agarwal, Vice President Director)
Q: Can you provide some update on Uttam Pranaam product? How do you see this product going ahead and its contribution?
A: Uttam Pranaam Bio Nano Phosphorus is unique due to its biogenic process. Initial results are good, with around 76,000 acres of land treated. We sold around 19,000 liters in Q1 FY-25, generating a turnover of about INR 2.5 crores. We expect exponential growth next year. (Ashish Srivastava, Assistant Vice President - Marketing)
Q: How are the credit terms in the crop protection business and how different are they from your other business?
A: In Q1, 66% of CPC sales were on cash and 34% on credit. For specialty nutrients, 36% were on cash and 64% on credit. Our credit cycles are lower than the industry average. (Ashish Srivastava, Assistant Vice President - Marketing)
Q: On the CPC and SN front, you have a target for FY 27 with a contribution margin of 12%. Given the current margins, is there any change in that guidance?
A: Volatility will keep happening, but we aim to maintain margins around the current levels. These are net margins, and EBITDA will be slightly less. (Anand Agarwal, Vice President Director)
Q: Can you elaborate on the nitric acid value chain investments?
A: We received estimates that were higher than expected. We are re-evaluating with another party and will update once we have satisfactory numbers. (Abhay Baijal, CFO)
Q: On the seed business, is the approach more organic or will there be distributed arrangements with MNCs?
A: Initially, it will be organic, but inorganic options will also be evaluated. We are prepared for the 3-5 year research cycle for hybrid seeds. (Abhay Baijal, CFO)
Q: How has the fixed cost base of the crop protection business moved over the last three years?
A: The allocation of costs in marketing has remained stable as the number of people has not increased. The fixed cost base trend is broadly in line with the overall business. (Abhay Baijal, CFO)
Q: Can you confirm the volume and price variance in the crop protection business?
A: In crop protection chemicals, sales have gone up by roughly 27%. Out of that, 17% growth has come from new molecules, 17% from increased volumes of the existing portfolio, and 7% reduction due to price decline. (Ashish Srivastava, Assistant Vice President - Marketing)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
