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Coromandel International Ltd Q4FY21 Earnings Conference call Highlights

Coromandel International Ltd Q4FY21 Earnings Conference call Highlights

Published on 27 May 2021|
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Covid Impact

  • The partial lockdown during COVID-19 in Q1 and the fact that the company took 2 annual turnarounds had an overall impact on productivity.
  • Due to the COVID epidemic, CAPEX projects were put on hold for the first half of the year.
  • The company made measures to reduce COVID's impact, safeguard the safety of its personnel, and assist the local community. At the Kakinada General Hospital, the company has established a unique COVID ward.
  • For fighting the pandemic, the company has started to set up 5 oxygen-generating plants as a part of CSR initiatives.

Key Business Highlights for Q4FY21 & FY21

  • There was a great improvement in exports of cereal.
  • With its continued focus on superior sales mix, farmer connect efforts, increased operational efficiencies, and improved working capital, Coromandel has had a very productive year.
  • On the manufacturing front, DAP complex fertilizer utilized 82% of its capacity during the quarter, indicating that the business had completed an annual turnaround activity in Vizag.
  • The capacity utilization for the entire year was also 82%.
  • The company has also set up nutria clinics in major markets to provide farmers with advice.
  • The business margins were healthy and improved as capacity utilization increased. The company is continuing to focus on next generation molecules and has been improving its products with the release of special items.
  • During the year, the company received registrations for more than 10 molecules for the local market and more than 50 molecules for international markets.
  • The company has increased its operating efficiency and employed digital technology to communicate with farmers – resulted in strengthened product mix, marketing initiatives & operational efficiency.
  • During Q4FY21 company received a subsidy of Rs. 2943 crores from government, the figure was of Rs. 100 crores during the same period last year.
  • Subsidy from the government during FY21 was Rs. 5041 crores as compared to Rs. 3424 crores in FY20.
  • The company is debt-free, and its balance sheet is still robust. The company continues to hold the year-marked deposits for specific growth-related investments.
  • Lower interest costs were achieved as a result of improved business performance, better working capital management, and lower borrowing costs.
  • To grasp the effect of raise in raw material prices, company is undertaking various manufacturing & transport efficiency enhancing measures & has done backward integration in form of Vizag Plant.

Financial performance highlights

For Q4FY21:

  • During the quarter, the company reported a consolidated total income of Rs 2,872 crore, compared to Rs 2,881 crore the previous year. Nutrients and related industries accounted for 83% of the total, with Crop Protection accounting for the remaining 17%.
  • In terms of subsidies, the non-subsidy share is 74% throughout the quarter and 26% over the year.
  • EBITDA for the quarter was Rs 260 crore, down from Rs 391 crore the previous year.
  • Non-Subsidy Business EBITDA increased to 44% from 28% in the same period last year.
  • Net PAT for the quarter was Rs.156 crores, down from Rs. 234 crores in the previous quarter.
  • Due to the annual turnaround, DAP complex sales were down 15% to 5.9 lakh tonnes for the quarter.
  • In Q4FY21, the company's market share was 15.3 percent, up from 15.2 percent the previous quarter. However, the PoS sale, which represents real consumption, was 20.1 percent for the quarter, up from 18.7 percent the previous year.
  • The Single Super Phosphate quarter Q4 sale was 1.8 lakhs metric tonnes, up 67 percent from the previous year, reflecting the fact that farmers convert to SSP when DAP prices rise.
  • Good volume growth on SSP with 6.7 lakhs metric tonnes, for next year expectations are around 7.28 metric tonne – additional product GroPlus is sold along side SSP, sales for the same is also increasing – invested in plant for the same at Ranipet of sulfuric acid for increasing capacity.
  • In Q4FY21, phosphatic manufacturing margins have been lower - a lakh of metric tonnes less compared to the prior year due to the company policy of not going too aggressive on pre-placement. Company still going on with the same policy.
  • For the FY21, phosphatic manufacturing margins are good.

For Full FY21:

  • The company's consolidated total income increased by 8% to Rs. 14,257 crores from Rs. 13,177 crores in the same period last year. Nutrients and related enterprises accounted for 85% of the total, with Crop Protection accounting for the remaining 15%.
  • Subsidy revenue now accounts for 78% of total revenue, up from 80% last year.
  • On a year-over-year basis, EBITDA increased by 16% to Rs. 2,018 crores from Rs. 1,733 crores the previous year.
  • For the year, the subsidy share of EBIDTA was 72%, down from 75% the previous year.
  • EBIT for FY21 was recorded at 16.6% margin & company expects the same to grow in coming years with new molecules launched.
  • PBT was Rs. 1,786 crores, compared to Rs. 1,379 crores the previous year.
  • Net PAT was Rs. 1,329 crores, up 25% from Rs. 1,065 crores in the previous year.
  • Working capital side improved significantly in FY21 with trade receivables improving from 48 days to 14 days & government subsidy days improving from 64 days to 15 days. – reasons: good crop harvest, additional & fast support from government to farmers, etc.
  • Operating activities generated Rs.4124 crores in net cash flow for the organisation.
  • DAP and complex volume for manufacture increased by 7% to 33.5 lakh metric tonnes during the year.
  • The total volume of DAP and complex was 29.4 lakh metric tonnes, with 4.1 lakh metric tonnes of imported DAP complex.
  • The company's market share is down slightly to 15.3 percent from 15.7 percent in the same time last year, although the company's PoS market share is roughly the same as last year at 15.7 percent.
  • PoS sale has actually gone up by 18%.
  • DAP and complex plant worked at 82% capacity for the entire year, producing 28.4 lakh metric tonnes, down by 4.7% from the previous year.
  • With the expansion of domestic formulation, domestic business to business sales, and exports, the crop protection and related company had a 24% increase in revenue last year.

Segment-wise highlights

  • The fertilizer industry's performance for the quarter was down 10%, with sales volume of DAP and complex fertilizers falling to 38.3 lakhs metric tons this year compared 42.6 lakhs metric tons previous year.
  • Industry PoS was higher by 15% in FY2021-22 as compared to FY2020-21, as a result of which summer crop results grew from 40.4 lakhs metric tons previous year in Q4FY20 to 46.5 lakhs metric tons in Q4FY21.
  • The quarter's complex sale volume was 26.6 lakhs metric tons, up from 23.8 lakhs metric tons the previous year.
  • DAP complex fertilizer industry volume increased by 10% year on year to 219 lakhs metric tons from 200 lakhs metric tons the prior year.
  • The complex volume for FY2021 is 114.1 metric tons, up from 97.3 lakhs metric tons the previous year, representing a 17% increase.
  • The volume of DAP was 104 lakhs metric tons, up from 102.7 lakhs metric tons, representing a 2% increase.
  • The nutritional and allied business segment experienced a slow quarter due to the company's recent launch and completion of an annual turnaround of six plants, most of the work is completed before 2nd wave of Covid-19.
  • Our organic and specialty nutrition businesses have done exceptionally well, with double-digit growth.
  • 25% of domestic formulation sales is due to company’s new products & marketing products.

 

 

Industry outlook

  • Agriculture sector is expected to rise by 3.4% during the current year.
  • India is forecast to generate a record 303 million tons of food grain and 325 million tons of horticultural input this year, following a blockbuster crop last year.
  • Various government initiatives like PM Kissan disbursement, direct money transfer to the farmers, increase in the MGNREGA outlay, increase in the agriculture credits scheme, high procurement of MSP both Kharif and rabi season, etc. are helping to boost the agriculture economy.
  • Cashflow of the industry has improved during Q4.
  • The government has allotted Rs.7,95,00,000 crores in the FY2021 budget, compared to Rs.7,13,00,000 crores last year.
  • Prices for some major raw materials increased from $795 per metric ton in Q4FY21 & is finalized at $998 per metric ton for Q$FY22 – government is intervening & trying to negotiate.
  • However, company has already purchased inventory in advance for one and a half month, so Q1FY22 won’t have any significant impact but price raise is expected in FY22.

Future Prospects

  • A huge evaporator facility will be built in Vizag to increase the supply of concentrated phosphoric acid, which would be used to meet phosphoric acid needs in Kakinada. At Vizag, a pilot liquid fertilizer factory has been established.
  • Plans for improving the operational efficiency, introducing new products & continue support to farmers with the expectations of normal monsoon for Indian agriculture economy
  • Capex plan of about Rs. 500 crores to Rs. 600 crores in FY22 – apart from regular maintenance company has new projects like additional capacity for acids, infrastructure, new granulation facilities, automation & digitalization capex, etc.
Company is looking for inorganic opportunities that would be inline with the company strategies & on organic side, company is looking at CPC with new molecules for next 2-3 years along with backward integration for the same. An evaporator is being set at Vizag plant on fertilizer’s side.
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