Release Date: October 29, 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) reported a significant increase in gross profit margin, expanding by 421 basis points year over year to 42.6%.
- The company experienced a robust sales rebound in key export markets, including Japan and South America, reflecting a positive shift in global demand.
- New product launches, such as Mashi Army and Portion, drove a 65% year-over-year growth in sales, indicating successful adoption.
- The company's 'Everyday Farmers Day' campaign enhanced engagement with farmers, resulting in increased product awareness and adoption.
- Sumitomo Chemical India Ltd (BOM:542920) maintained strong financial discipline, with tight controls over collections and minimizing sales returns.
Negative Points
- Excess and uneven rainfall disrupted crop protection activities, affecting the consumption of agrochemical products.
- Cotton acreage declined sharply, particularly in North India, leading to reduced pesticide consumption.
- Delayed monsoon withdrawals damaged several crops, including rice, cotton, soybean, corn, and pulses in certain regions.
- The domestic agrochemical revenue growth was modest at 5% for H1, indicating challenges in the domestic market.
- The company faced a 15% average decline in product prices, impacting revenue growth despite increased volumes.
Q & A Highlights
Q: We have done well on margins, especially with exports more than doubling. Are the new export orders high margin, and will this continue?
A: Chetan Shah, Managing Director, explained that margins are typically lower in the rabi season compared to the current season. However, with sustainable input costs and stable selling prices, margins should be superior to historical levels. The growth is comprehensive across the business, not just from specific high-margin export orders.
Q: How are you looking at H2 demand-wise, both domestically and in export markets?
A: Chetan Shah expressed optimism for the second season, citing sufficient water and soil moisture conducive to increased sowing by farmers, leading to robust demand in the second half.
Q: Can you break down the export business between what goes to the parent and the technical exports from the former Excel business?
A: Chetan Shah noted that a large part of exports is from the off-patent segments, contributing significantly to growth. About 75% of exports are to third parties, with 25% to the parent company.
Q: Regarding the Tarapur plant, are there any challenges or revisions to the target of full production by FY26?
A: Kunal Mittal stated that the situation remains the same as previously mentioned, with no significant changes. The plant is not at full production due to global market conditions, but they are monitoring the situation.
Q: What is the outlook for the domestic industry in terms of value growth for FY25?
A: Suresh Ramachandran mentioned that achieving a 12% growth might be too ambitious, but a 9-10% growth on a full-year basis is more realistic, considering the first half's performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
