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Analyst Meet / AGM
23-Jul-20
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Conference Call
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Rallis India
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Agrochemical sector is relatively well placed in terms of demand visibility
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Rallis India held a conference call on 23rd July 2020 to discuss the results for the quarter ended June2020 and way forward.Mr. SanjivLal- Managing Director & CEO, Mr. S. Nagarajan- Chief Operating Officer and Mr. Ashish Mehta- Chief Financial Officerof the company addressed the call.
Highlights of the Concall
- The company feels that while the overall uncertainties and challenges surrounding Covid-19 pandemic remain, on ground things have started to improve for agrochemical sector when compared with the previous quarter. Logistical challenges which were prominent during the previous quarter are now getting addressed. Labour issues to some extent havealso eased.
- Overall business in the agrochemical sector remains strong. Farmer sentiments and liquidity levels are higher on the back of strong rabi season and higher remunerative prices for agri products. Water storage at the reservoirs is at a healthy level, timely onset of the monsoon along with a steady progression so far has further buoyed the sentiment. As a result early start of the kharif sowing has started.
- Logistical challenges have subsided resulting into better product availability in the system.
- 27 agrochemical products suspended account for 25 to 30% of company's domestic sales. Exports are allowed. Talks and negotiations are going on to review this ban. A committee is being appointed and the company expects a positive outcome as the decision to ban does not seem to be well-thought decision.
- Dominant reason for higher margins this quarter is higher contribution from domestic formulations growth and less contribution from institutional B2B sales.
- Working capital situation has improved substantially from 110 days to around 60 days. Focus on cash will continue
- The situation at ports in terms of raw materials imports clearance especially from China has been improving.
- The company focus is on maintaining the growth momentum achieved in Q1FY21 by improving product mix, launching new products and widening its product reach across business segments.
- The company introduced six new products in FY20. While the initial response for the products was favorable, the company would see the full impact of the same during the current year.
- Domestic formulation business grew by 26% over the previous year. They are working towards introducing new products during the course of the year, which will help maintain the revenue momentum.
- The timely onset of the monsoon has resulted in good pickup of agricultural activities despite difficulties on logistics in the earlier parts of the quarter. The company was able to place its products in the consuming centers.
- Initial assessments indicate a lower than expected uptake of its cotton product. While the company continues to maintain a strong position in Paddy and millet, on an overall basis sales has shown a minor 3% growth over the past.
- This year, there has been some change in the crop pattern- Some crops shifted towards groundnut and soybean away from cotton, especially in Gujarat and Maharashtra.
- International Business revenue growth during the quarter remain flat due to continued pressure on metribuzin sales, which continues to be impacted by revenue overhang and key markets.
- Metribuzin has been a problematic product for the company for the last two quarters due to huge inventory of this particular product in North America which is a key market.
- Overall Capex implementation impacted due to COVID 19
- The company has completed phase two expansion of Metribuzin. The company is also hopeful of commissioning the new formulation unit in Dahej chemical zone during the year.
- The company is also setting up a state of the art R&D facility in Bangalore to further drive its growth with a significant step up in a product development for crop protection, crop nutrition and seed research.
- Agrochemical sector is relatively well placed in terms of demand visibility. Further with logistics and labor issues declining, the company hopes the business is well placed to deliver consistent growth over the coming years.
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