Godrej Agrovet Q1FY22 Conference Call Highlights

Financial Highlights

•Revenue from operations stood at 1993 crores displaying an upward momentum of 28% YOY from 1554 crores & a uptrend of 36% QOQ due to improvement in all the segments of the business

•EBITDA stood at 180 crores with an upward juncture of 3% from 174 crores YOY & a growth of 48% Sequentially. Some segments such as diary & poultry contributed negatively. Crop protection & Animal Feed segments were highest contributors.

•EBITDA margin stood at 9%, displaying a degrowth of 2% YOY & growth of 1% QOQ due to higher cost of raw materials

•PAT showed a growth of 19% YOY from 89 crores & stood at 106 crores, displaying a growth of 86% QOQ.

•PAT margin also stood at 5% with a degrowth of 1% YOY & a growth of 1% sequentially, declining finance cost being the reason for sequential growth

Business Highlights

Segment-wise business highlights

• Animal Feed: Demand up-tick in feed categories i.e. cattle, broiler and layer led to strong volume growth.
• This coupled with price hikes taken during the quarter resulted in revenue growth of 33.9% YoY from 748 crores to 1001 crores in Q1FY22
• Segment results grew by 32.5% YoY from 48 crores to 63 crores despite high increase in key commodity prices.
• Realization of R&D benefits and strategic raw material stocking supported profitability levels
• However, aqua feed business was adversely impacted by limited ability to pass on the raw material price increase in shrimp feed
• Contribution to Revenue stood at 47% whereas contribution to EBITDA stood at 38%

Vegetable Oil

• During the current quarter, segment revenue grew by 83.5% year-on-year from 157 crores to 288 crores due to increase in Crude palm oil and Palm Kernel oil prices
• Segment results increased to Rs.32.6 crore in Q1FY22 from Rs.6.5 crore in Q1FY21 supported by strong segment revenue growth, registering a growth of 403%
• Contribution to Revenue stood at 13% whereas contribution to EBITDA stood at 19%

Crop Protection

• In Q1FY22, segment revenues  grew by 15.4% YOY from 208 crores to 240 crores and results grew by 5.9% YOY, from 60 crores to 64 crores ,driven by higher sale of in-house products over the previous year.
• Sales could have been higher, but good and early start of south-west monsoon was followed by a long gap of 25-30 days, which affected the sowing of major crops and thereby the demand for agrochemicals in June -21
• Contribution to Revenue stood at 17% whereas contribution to EBITDA stood at 48%

Astec

• Revenue growth of 14.9% from 111 crores to 128 crores is driven by domestic business as exports have declined in Q1FY22. Prices of key products declined in the international markets, which caused sales to be lower despite increase in volumes. Segment result degrew by 13% from 29.5 crores to 25.5 crores
• EBITDA is also impacted by raw material costs inflation which restricted increase in gross profit. Further, fixed overheads have increased due to normalization of business activity over the previous year.

Dairy

• Sales grew by 12.7% YOY from 237 crores to 267 crores driven by volume growth across product categories, on a low base of Q1FY21. However, the demand for milk and milk products was impacted by the micro lockdowns in southern states in Q1FY22
• EBITDA degrew from 10 crores to -3 crores EBITDA has been impacted by increase in procurement costs and other fixed overheads. Companies in southern India have not taken price hikes to pass on the increase in procurement costs.
• Contribution to Revenue stood at 13% whereas contribution to EBITDA stood at -6%

Godrej Tyson Foods Limited

• Company recorded revenues of Rs.177.6 crore in Q1FY22, a growth of 7.3% from 165 crores However, at the EBITDA level company reported a marginal loss from 21.5 crores in Q1 FY 2022 to 0.5 crores in Q1 FY 2022. Low end-product prices on one hand and high input costs on other hand impacted profitability levels.

Other Highlights

• The second wave of COVID-19 has significantly impacted economic recovery seen in the preceding quarter, especially in rural India which had a much stricter lockdown. Further, after a good start to the south-west monsoon, there was a long gap that resulted in lower Kharif sowing. However, recovery has gained pace from July-21 onwards with macro-economic indicators improving m-o-m and rainfall in July-21 covering most parts of India.
• Company expects recovery to be faster in the second half of the year, as vaccination percentage increases leading to the normalization of business activities.
• Dry spells in June impacted the herbicide segment for GOAGRO. Hitweed and Hitweed max, its star products, have not been able to achieve targeted sales. The company is now trying to make up for lost sales from other products Product pipeline of the Crop Protection segment looks attractive with 4 herbicides, 1 fungicide and 1 PGR in pipeline. Products find their usage mostly in Cotton and Paddy. The company also has 2 insecticides, 1 herbicide and 2 fungicides waiting for approval
• Company expects growth of 17-18% in Q2 FY 2022 in animal feed market with a target of improvement in market share