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The company held its analyst meet on 30 April 18 and was addressed by Mr. V Shankar MD
Key Highlights
Company imports around 40% of its total raw material from China. Due to supply side constraint in China, the landed costs of these raw materials have increased substantially in past 2 quarters.
Chinese government has closed down many chemical plants in China on account of environmental issues. This has led to overall increase in cost for entire agro chemical industry as local manufactures have also increased the prices in lieu of the increase in landed costs.
North East monsoon was lower by 11% YoY. South West Rain was also uneven in H2 FY 18 which led to further lower offtakes and thus lower volumes. Product mix got adverse in such a scenario.
Export dispatch which was supposed to happen in FY 18, got delayed and now will get dispatched in H1 FY 19. Exports continue to remain around 1/3rd of revenues and will remain around this level going forward.
Thus, whatever could have gone wrong, had gone wrong for the company in FY 18 and despite that, the company has reported a flattish growth in FY 18 on YoY basis.
Company has plans to invest in backward integration so as to manufacture some of these intermediates and reduce the import dependency.
The company has fully commissioned the Dahej plant and the new contract manufacturing order which is secured last year will be executed in FY 19.
Company will use around Rs 80-100 crore for expansions of manufacturing activities. Of the planned capex, around Rs 50 crore is already spent in FY 18 on new intermediates.
The new products launched in FY 18 like Odis, Cenator and Pulito did well in FY 18 despite lot of macro disadvantages. Expects these products to do significantly well in FY 19.
Tax rate at consolidated level will remain around 26-28%.
The company also took some price increases in April 18 which should help in easing the margin pressure.
Metahelix has seen around 7-8% growth in net sales. The company has now increased its presence in various seeds. Expects Metahelix to breakeven in FY 19.
The landed cost of Chinese imports has eased out, as lower offtakes were seen at higher prices. Expects the scenario of lowering of the landed cost to continue in FY 19. Further a normal monsoon and focus on overall rural economy in FY 19 due to elections, should result in overall good rural growth going forward.
Expects better volumes in FY 19.
Expects margins to improve every quarter going forward on QoQ basis.
Expects Dahej plant to see sales in FY 19.
Expects overall international business to do better in FY 19 as compared to last year.
Overall, whatever worse one had expected and could not have expected was seen in past 2 years. Expects good recovery and growth going forward.
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