Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Meghmani Organics Ltd (BOM:543331, Financial) commissioned a new urea plant and a Co-gen Power Plant, which will help reduce energy costs.
- The company successfully tapped 65,000 farmers and conducted over 3,500 demonstrations to showcase the efficacy of Meghmani Nano Urea.
- Meghmani Organics Ltd (BOM:543331) plans to introduce four to five new products in the fertilizer, biofertilizer, and biostimulant categories.
- The company reported a quarter-on-quarter improvement in revenue and EBITDA in Q4 FY24.
- The management is optimistic about demand improvement and expects better financial performance from the second half of FY25.
Negative Points
- The company's profitability was impacted by sluggish global demand and lower product price realization.
- Inventory destocking led to a significant impact on profitability, up to INR70 crore.
- The pigments segment reported negative EBITDA due to price erosion and volatility in crude oil prices.
- Capacity utilization in the pigments segment was low at 41%, indicating underutilization of resources.
- The company faces challenges from Chinese competitors, particularly in the titanium dioxide market, where anti-dumping duties are being considered.
Q & A Highlights
Q: Recently, one of the global players in the pigment space has filed for bankruptcy. How do you see that affecting us and what benefits could we get from this?
A: Yes, some multinational companies in Europe are facing problems, which is beneficial for us. High-cost companies in developed markets like the US and Europe will shut down, and the market will move to India and China. India has an upper edge over China in the pigment segment, so we expect growth in this area. - Ankit Patel, CEO
Q: Can we expect that the prices have bottomed out in the pigment space or is it expected to remain at these levels?
A: Yes, prices have bottomed out in both the pigment and agro segments. With the improvement in demand, we expect prices to rise, leading to an increase in volume and value. - Ankit Patel, CEO
Q: What kind of revenues are we expecting from the crop nutrition segment in FY25 onwards?
A: Nano Urea is a new product, and we are creating a pool factor with demonstrations. Significant growth is expected over the next two to three years, but it is difficult to specify revenue for the first year. Capacity utilization will be low initially but will improve in subsequent years. - Ankit Patel, CEO
Q: How is the debt situation and what are the plans for debt reduction?
A: We have completed major CapEx and do not plan significant CapEx in the next one to two years. We will repay about INR140 crore this financial year and further reduce debt next year. The debt position will improve significantly in the next two years. - Ankit Patel, CEO
Q: What is the current utilization level of the titanium dioxide plant and the market outlook?
A: The plant's utilization level is currently low but expected to reach 60% plus from the first quarter onwards. The Indian market for titanium dioxide is about 400,000 tons, with significant imports from China. Anti-dumping duties on Chinese goods are expected, which will benefit local manufacturers. - Ankit Patel, CEO
Q: What gives you confidence that the agrochemical segment will see recovery in FY25?
A: We export to over 70 countries and are in touch with global customers. Inventory levels have normalized, and with the focus on food security and increasing population, demand for crop protection chemicals will rise. Customers are showing positivity and placing orders cautiously. - Ankit Patel, CEO
Q: How confident are you about scaling up Nano Urea profitably in the next two to three years?
A: We have a strong presence in the agriculture segment and are conducting demonstrations to educate farmers. The government is promoting Nano Urea, and we expect significant growth. Margins are expected to be in the range of 15% to 17%. - Ankit Patel, CEO
Q: What is the market size for titanium dioxide and who are the major players?
A: The Indian market size is close to 400,000 tons, with about 70% being imported. Major domestic players include Kerala Minerals, Tuticorin Minerals, VV Mineral, and Meghmani Organics. We expect to utilize our plant at about 60% capacity this financial year. - Ankit Patel, CEO
Q: How does Nano Urea compare to traditional urea in terms of benefits and usage?
A: Nano Urea has smaller particle size, leading to better absorption by plants. It reduces soil, air, and water pollution and is more efficient than traditional urea. The government aims to replace 9 million tons of imported urea with Nano Urea by 2025-26. - Ankit Patel, CEO
Q: How do you see the demand scenario in key markets like North America, Latin America, and Europe?
A: Demand in these markets was impacted last financial year but is now picking up. We expect volume growth and price increases, leading to better profitability. - Ankit Patel, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
