Release Date: May 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sumitomo Chemical India Ltd (BOM:542920, Financial) recorded a 3% year-over-year increase in Q4 FY23/24 revenue, reaching INR674 crore.
- Gross margin improved significantly to 41.7% in Q4 FY23/24, up by 1,042 basis points compared to the same period last year.
- EBITDA saw a substantial increase of 74% year-over-year in Q4 FY23/24, reaching INR140 crore.
- The company successfully liquidated high-cost inventory and improved procurement efficiencies, contributing to better financial performance.
- Sumitomo Chemical India Ltd (BOM:542920) maintained strong cash and cash equivalents of INR1,207 crore as of March 31, 2024, after paying an interim dividend.
Negative Points
- Revenue from operations for FY23/24 decreased by 19% year-over-year, from INR3,511 crore to INR2,844 crore.
- The export revenue proportion dropped from 25% in FY22/23 to 20% in FY23/24 due to pricing pressures and elevated inventory levels.
- EBITDA margin for FY23/24 decreased to 16.7% from 19% in the previous year.
- Profit after tax for FY23/24 declined to INR370 crore from INR502 crore in FY22/23, reflecting challenging market conditions.
- The company faced significant challenges in the agrochemical sector, including adverse weather conditions, poor demand, and supply chain disruptions.
Q & A Highlights
Q: What would be your guidance for FY25? Will we beat our past peak numbers?
A: Our primary objective is to increase the volumes of our products rather than just matching or surpassing past numbers. Given the price drops of 25-30% in some products, achieving last year's turnover will require significant volume increases.
Q: Could you shed some light on the performance of Barrix and the pheromones business?
A: Barrix, acquired in December 2023, has shown promising potential. In the 100-day period since acquisition, it contributed INR 10-12 crore to our consolidated sales. We expect significant year-on-year growth from this sector.
Q: What drove the sharp gross margin expansion in Q4?
A: The margin expansion was due to a favorable product mix, liquidation of high-cost inventory by August, and procurement of raw materials at lower prices. We did not pass on the entire cost benefit to the market, which helped maintain higher margins.
Q: How are you seeing international demand, especially in the LatAm market?
A: We are observing a recovery in international demand, particularly in the LatAm market. However, the extent of this recovery is still uncertain. Stability in order positions is a positive sign.
Q: What is the status of the CapEx and project timelines for Bhavnagar, Tarapur, and Dahej?
A: Bhavnagar is fully operational and expected to reach 100% capacity this year. Tarapur is ready but will not reach full capacity until FY25/26 due to global demand issues. Dahej is awaiting environmental clearance, expected by year-end, with production to start 18-24 months post-clearance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
