Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sharda Cropchem Ltd (BOM:538666, Financial) reported a volume growth of approximately 5% year-on-year in Q4 FY24.
- Gross margins increased by 300 basis points from 31.6% in Q4 FY23 to 34.6% in Q4 FY24.
- The company remains net debt-free with cash and liquid investments of INR375 crore as of March 31, 2024.
- The Board of Directors recommended a dividend of INR3 for the financial year 2023-24.
- Sharda Cropchem Ltd (BOM:538666) expects revenues to grow by 12% to 15% in FY25, with EBITDA margins projected to be in the range of 15% to 18%.
Negative Points
- Revenues for Q4 FY24 decreased by 11% year-on-year from INR1,482 crore to INR1,312 crore.
- The non-agrochemical business saw a significant reduction of 42% year-on-year to INR97 crore.
- Full-year FY24 revenue decreased by 22% year-on-year to INR3,163 crore.
- Gross margins for the full year FY24 decreased to 25.9% from 29.3% in FY23.
- Working capital days increased to 158 days as of March 31, 2024, primarily due to slower receivables.
Q & A Highlights
Q: When you said that we will be growing with 12% to 15%, does it mean that you will be growing at 12% to 15%, keeping the last year as is, I mean, the 2023, 2024? And when will we see the realizations coming to 2022 level?
A: No, '23 level. It will take some time for the realization to come up to '21, '22 levels.
Q: I was listening to your CNBC interview that you were guiding for 5% to 10% of volume growth for this year, but now you're saying in terms of revenue 12% to 13%. So is it like pricing? We expect pricing to recover?
A: Yes, please.
Q: How are we looking in terms of foreign exchange laws, inventory losses, demand slowdown?
A: The foreign exchange loss was in the year before last, and that was a temporary phenomenon and it got recovered by the end of that year itself. Now these are all factors due to external factors. Universal factors like the Ukraine-Russia war and many others, some of which you cannot predict in advance.
Q: In terms of margins, you're saying 15% to 18%. But if I look at our history, we have never done lower than 16% margin. Any comment on why we are seeing 15% and not 17%, 18%, 20% margins?
A: This is just a range that I have stated. It can happen that we go up to 18% or down to 15%. It's not a precise calculation.
Q: Can we expect some inventory gains in the first quarter or second quarter?
A: Not much because the increase is not so abrupt. It is very gradual.
Q: Our balance sheet shows our receivable and inventory absolute number is down. Is it because pricing is down or have volumes also reduced?
A: Mainly because of the prices.
Q: During this Q4, we have done agrochemicals volumes growth of almost 29%. What is your perception of this?
A: Q4 is the best business among all the four quarters. The demand has been better, and we had the availability of products. We were able to meet the demand of the customers very promptly.
Q: In terms of working capital, the inventory days and receivable days have increased on a year-on-year basis. Do we expect this to be the normal working capital incrementally or will it come down over FY25?
A: This working capital has gone up mainly because of the receivable days. Many of our customers have requested an extension of the credit period. This is not a regular feature and should be corrected.
Q: What has been driving the decline in the non-agrochemical segment?
A: The main factor is the freight charges, which have increased astronomically high, and the time of travel from the source to the destination. This has naturally impacted demand.
Q: The cost and time of registering new products have increased significantly. Will this affect revenue growth?
A: The costs are going up because authorities want to ensure the compatibility and safety of the products. Sharda has an advantage because we registered many products when costs were lower. We can still recover our investments in about two to three years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
