Coromandel international Q1-2021 NET PROFIT Increases by 300% YoY.
What We Heard – Conference Call - Key Takeaways:
Kharif Season: Better-than-normal southwest monsoon, improved soil moisture and
increased reservoir levels resulted in the good crop sowing season, which shall lead to
better Kharif yield, as well. Higher minimum support prices (MSP) for the Kharif crop will encourage the farmers to invest more in agri-inputs. For instance, the Government of
Andhra Pradesh has given farm loan waiver up to Rs1lakh. While Telangana announced
the “Rythu Bandhu” scheme, wherein cash is directly paid to the farmers for the upcoming
Recent Reforms to Help Price Discovery & Better Storage Infrastructure: The company is
positive on the slew of reforms undertaken by the government post COVID-19 outbreak. Also,
the central government approved three major decisions i.e. (1) The Essential Commodities
(Amendment) Ordinance 2020;
(2) The Farmers (Empowerment and Protection) agreement
on price assurance and farm services ordinance,2020; and
(3) The Farmer’s Produce Trade
& Commerce (Promotion & Facilitation) Ordinance, 2020, which will be the catalysts in price
discovery and better storage infrastructure.
Subsidy & Non-subsidy Break-up (Revenue): Subsidy and non-subsidy revenue break-up
stood at 80:20 in 1QFY21 compared to 79:21 in 4QFY20. Whereas, EBITDA share came in at
79:21 in 1QFY21 vs. 84:16 in 4QFY20.
Outstanding Subsidy: Outstanding subsidy stood at Rs25.86bn as of 30th June 2020 vs.
Rs10.77bn as of 30th June 2019. While it received Rs5.19bn subsidy in April, it did not receive
subsidy in May and June, as the government prioritized urea companies for the release of
subsidy. The company received Rs3.67bn subsidy in July.
Working Capital: Working capital improved due to a faster collection of receivables.
Research & Development (R&D): The management stated that the company will continue
to invest in R&D and product development. Further, it will continue to its expenses on the
marketing front to have better connectivity with the farmers. The rationale for increased
R&D is to focus more on crop protection, nutrients, and retail business, as the management
expects these businesses to drive growth, going forward.
Cash Deployment: The Company intends to deploy cash in the crop protection business,
as this is expected to witness rapid growth than other segments owing to opportunity in the
form of off-patented molecules. In the fertilizer segment, the investment will be required for
debottlenecking its Kakinada and Vizag plants, which will lead to 1.5-2 lakh tonne additional capacity.
Cost Saving: The company saved Rs1.3bn in freight and distribution costs due to a focus on
Debt: The company’s gross debt stood at ~Rs15bn, while its net debt stood at ~Rs8bn as of
June 30, 2020.
Other Expenses: Other expenses declined during the quarter due to lower travel expenses
and digital marketing initiatives.
Volume Guidance: The management refrained from giving any guidance on volume front
owing to COVID-led uncertainty.
Impact of Higher Irrigation/Mechanization: The company’s key markets i.e. Telangana
and Andhra Pradesh are focusing more on irrigation to reduce farmers’ dependency on
monsoon. Further, increased farm mechanization will also augment the use of fertilizers
and crop protection business. Also, the company has tied-up with three companies to
source products in a better way.
Found this on Organic Fertilizers and the opportunities. I see 3 indian companies in the list.
- Coromandel International Limited
- KrishakBharati Cooperative Limited
- National Fertilizers Limited
2 of them are listed on the bourses.
good quarterly results posted
Have been looking in for some value-creating stocks for long-term investment. Came across this one and seems to have done well over the years in terms of steady growth and is backed-up by a strong family group (Murugappa). Just was curious to know the outlook / feedback / opinion of others in view of the following data :
- Promoter Group EID Parry sold certain shares and brought down their holding in the company. I am fine to discount it as apparently the sale was to meet the requirements of EID Parry as a standalone company. The shareholding percentage of Promoter Group overall is still high enough. But the news did bring down the price of stock to 820 range from 870-890 which it had attained before the fall.
Further, over the last few weeks, it has come down to 750-770 range where it seems to be consolidating. But has been bearish for the last month or two.
- For people with knowledge on Agrochemical industry, wanted to know how the various constituents of fertilisers, crop protection, insectides, pesticides, herbicides work along with environmental impacts, ecofriendly products, ban on certain products now or in future which is a risk to business and other such factors for making more informed decision.
Recently Heranba Industries IPO had a good response and this was followed by rally in several fertiliser stocks like RCF, NFL, GNFC, Chambal Fertilisers, Deepak Fertilisers but Coromandel has not moved much. Also, would like to know how stocks like PI Industries, Dhanuka Agritech, BASF India, Bayer Cropscience, etc fare wrt Coromandel International. Bayer and PI trade at a significantly higher PE of around 50 as against 20 of Coromandel International. So when few stocks rally and this one doesn’t move, at times I start reconsidering the decision and wondering whether I am missing out on something which others may be knowing
Also, for people from Telangana or having knowledge of the region, wanted to know the pedigree and reputation of the family group as the marketed info or data in public domain may not always be accurate.
There was some dispute where one of the female heirs was not allowed board position in a holding company and so she planning on going in for a legal dispute but I don’t think that affects the business and operations of Coromandel International.
The environmental impact, possibility of ban on certain chemicals/fertilisers which are significant part of product portfolio of the company, future of agrochems, export potential of the products of this company, competition from China and other countries entering this domain and other such concerns also could be deliberated upon and if someone can throw light on these issues and their opinion on the same, it would be really helpful.
Otherwise, in terms of financials, performance, balance sheet, other parameters, this company seems to be doing fine and looks interesting to me.
My first post in this community and looking forward to meaningful and value-adding and value-sharing interactions here with fellow members
The Company clocked a turnover of Rs. 14,205 Crores during FY 2020-21. lt was ranked among the top 20 best companies to work for by Business Today and was also voted as one of the ten greenest companies in India by TERI, reflecting its commitment to the environment and society. Coromandel is a part of the INR 381 Billion (38,105 Crores) Murugappa Group
Concall summary :
Q4 concall FY22
MD : Sameer Goel
CFO : Jayashree satagopan
GM, Finance and Investor relation : Mayur Gangwal
Acquiring : 175 Cr for stake + 75 as debt for expansion
- Baobab Mining and chemical (BMCC) ( Rock phosphate mining company) : Rock is used in manufacturing phosphoric acid ; Intermediate for phosphatic fertilizer production. Helps reducing import for manufacturing. Meets 1/3rd company rock phosphate requirement.
- Purity of this rock > 33% (P2O5 content)
- Start sourcing 5L tons maybe in 3 years.
- Current capacity 1L ton. Increasing to 5L ton will increase operational efficiency and reducing cost.
- Price depends on supply and demand, puritiy of rock + negotiation powers.
- Part of deal : Coromandel gets preferred supply of the rock and gets large share.
- Currently not cash positive.
- Provide EBITA improvement due to this new deal over coming quarters.
After this new acquisition the extent of backward integration for rock phosphate can cross 75-80% once capacity is enhanced.
In an industry like fertilizers, backward integration can be a big entry barrier by itself since material pricing is very volatile and can bite if the USD INR sees a further spike. India continues to be the largest importer of phosphatic rock and fertilizers going by the conf call. We are unlikely to see anyone challenging Coromandel’s market position and access to captive raw material supply anytime soon in India.
However the nature of this business is that the market refuses to pay a good valuation, given the seasonality, govt interference and other cyclical factors involved. Volume growth at the industry level has also not been great with the long term rate hardly crossing 5% p.a. within the fertilizer vertical.
The company has had tremendous growth in the last 3-4 years. For example, sales (resp. operating profit, net profit) in the trailing twelve months upto Sep22 was up by ~90% (resp. ~84%, ~150%) compared to Mar19. Can someone who has been following this company/sector please explain the underlying reason for this tremendous growth? In particular:
Q1. Was there significant new capacity that came online during this period?
Q2. To what extent are the fertilizer and agrochemical industries cyclical? In particular, are there significant fluctuations in the prices of fertilizer and agrochemicals? Are there significant fluctuations in the prices of the raw materials? Are there significant changes in the volume of fertilizers and agrochemicals consumed by agriculture?
Q4 23 Concall keypoints
The Company recorded a consolidated total income of Rs. 5,523 crores during the quarter and
Rs. 29,799 crores during the full year vis-a-vis corresponding period where the total income was
Rs. 4,304 cores for the quarter and Rs. 19,255 crores for the full year. This represents the growth
of 28% for the quarter and 55% on the full year
Phosphatic fertilizer industry sales higher by 62% to 46.4mn mt as against 28.7mn mt in same period last year.
Capacity utilization at +90% for complex fertilizers during FY23 which management is expecting to sustain in the coming year.
10% yoy growth in volumes which is expected to sustain in FY24.
Capex of 2000 cr planned in next 18-24 months from which 1000 cr is towards crop protection, looking for opportunities in CDMO and specialty chemicals, 700-800 cr towards fertlizers and 200-300cr towards maintenance.
Company is planning this capex through internal accruals.
Working towards greenfield expansions to achieve backward integration, debottlenecking of existing plants.
Margins expected to improve due to introduction of new products, reduction in prices of raw materials and backward integration
There is a drone making subsidiary of Coromandel. I dont have the specifics. Doest it contribute to the profits?
They recently acquired the Chennai based drone company, which is popular for agricultural spraying of fertilizers, & Mapping. My guess is they want to get in to not only making fertilizers but spraying it too. Hopefully it contributes to revenue. We might have to wait for a couple of quarters to see how it unfolds as the acquisition is expected to be completed only by Q2 of FY24
Disc - invested (tracking position)
acquisition completed, holds 51% stake in Daksha
Coromandel International Limited, part of Murugappa group, is a renowned agricultural solutions provider in India. It is the second-largest player in the phosphatic fertiliser industry in India.
Its market position is underpinned by a leading position in Andhra Pradesh and Telangana - India’s largest complex-fertiliser market - and a wide product portfolio.
The business operations are divided into two major segments: Nutrients & other allied businesses and Crop Protection.
The company has also been gradually increasing the sale of non-subsidy-based products, including crop protection, specialty nutrients (secondary and micro-nutrients of sulphur, zinc, calcium, and boron), water-soluble fertilizers and compost), and bioproducts.
- Improved NPK & DAP Fertilisers market share (consumption-based) to 17.2% (vs. 16.7% Last Year) on the back of 9 New Product Introductions
- 45% equity stake acquisition in BMCC (Rock Phosphate mining company)
- SAP 3 Project – to be commissioned in FY2024
- Multi-Purpose Plant at Ankleshwar
- Strategic Investments in Agtech startups
- Desalination Plant at Visakhapatnam
On the global front, the agri-inputs sector was impacted by the geopolitical uncertainty in the Baltic region. Sudden export sanctions on Russia and Belarus, which together account for 41% of globally traded potash and 25% of nitrogenous fertilisers , resulted in significant volatility in global markets. Export restrictions from China added to the supply pressures on an already reduced global availability
On the crop protection side, an emerging trend of global agrochemical companies looking to diversify their sourcing could be seen, with India being well positioned as a strong manufacturing alternative.
With its rich know-how of complex chemistry, fast-evolving agrochemical ecosystem, sound regulatory compliances, and deep relationship with global innovators based on ethical IPR protocol and cost-efficient manufacturing, India offers a competitive manufacturing destination to the global CPC industry . The next few years can potentially be a watershed moment for the Indian CPC industry.
Over the last six years, the agriculture sector in India has grown at 4.6% CAGR supported by Government’s reformative measures.
United Nations has declared 2023 as the International Year of Millets , emphasizing the potential role of millets in strengthening small farmers, mitigating food security challenges and attaining sustainable development goals.
This along with Government’s move to hike the minimum support price for the crop provides huge impetus to India as the nation accounts for nearly 20% of the global millet production . Additionally, millets are known to have lower carbon and water footprints and have substantial resilience to climate change impacts.
As per International Fertilizer Association, a 3% recovery in global fertiliser consumption is anticipated in 2023 to 194 million MT of nutrients (+5.9 million MT), returning the consumption levels on par with 2019.
India is the second largest consumer of fertiliser globally after China, servicing over 190 million hectares of gross cropped area and reaching 140 million farmlands. Despite India not being endowed with the major raw materials of fertilisers, it is the third largest producer and meets 70-75% of its nutrient requirements domestically
There has been an increased thrust on reviving the Single Super Phosphate (SSP) industry, the cheapest source of Phosphate providing multiple nutrients like Sulphur and Calcium. In the current elevated commodity cycle, SSP has emerged as a good substitute, especially for oilseeds and pulses for semi-arid & rain-fed regions.
Coromandel holds the top position as the single largest producer of Single Super Phosphate (SSP) in the country, with a consumption-based market share of 13.8%
The global Crop Protection industry is estimated to grow by 6% to USD 69 billion in 2022, led by improved sales across Latin America and North America regions. Improved crop prices in 2022 supported higher consumption of Agrochemicals during the year
In India, the Crop Protection sector was seen to be impacted by varied factors. Continuous rains across several parts of the country resulted in lesser pest infestation leading to lower demand for key agrochemical molecules. Higher end customer prices and per-acre cost to the farmer as a result of an increase in input prices impacted the demand for agrochemical products.
The industry players started trials for the Drone Application of Pesticides with a push from the Central Insecticides Board & Registration Committee (CIB&RC). CIB&RC has permitted the usage of 507 registered Crop Protection products with drones for an interim period of 2 years.
Coromandel’s corporate venture capital arm Dare Ventures has made an investment in Dhaksha Unmanned Systems , a Drone technology and manufacturing company providing a complete range of Unmanned Aerial Systems (UAS) solutions for agriculture, defence and other enterprise applications.
To secure key raw materials by promoting local manufacturing, the company is setting up a new 1,650 metric tonnes per day design capacity sulphuric acid plant at its fertiliser complex in Visakhapatnam at a cost of INR 400 Crore.
The new Sulphuric acid plant will reduce the import dependence considerably and ensure sustainable production of Phosphoric acid, one of the key raw materials for phosphatic fertiliser manufacturing.
India is a net importer of sulphuric acid, and the 3rd largest importer globally, accounting for close to 20 lakh metric tonnes of imports .
The country’s Chemicals industry is positioning itself as an attractive sourcing alternative to leverage the macro tailwinds of China+1.
Coromandel has planned to foray into Contract Development & Manufacturing Organization (CDMO) business and diversify into Specialty and Industrial Chemicals segment.
Towards these initiatives, the company has committed an investment of INR 1,000 crores over the next couple of years . As a part of the move to strengthen its core business, the company has scaled up its multipurpose plant at Ankleshwar.
Di-Ammonium Phosphate (DAP) is the second most used fertiliser in India; however, India relies on imports to meet more than 50% of the DAP requirement. As part of the ‘Atma Nirbhar Bharat’ vision, the government has been focusing on the usage of technology-driven solutions to drive self-sufficiency in meeting the nutrient needs of the nation.
Coromandel has successfully developed a nanotechnology-based fertiliser, Nano DAP, from its R&D centre based at IIT Bombay. The product has been approved by FCO and the company is setting up a greenfield facility in Andhra Pradesh and plans to launch the product in 2023
As part of the PM Program for Restoration, Awareness, Nourishment and Amelioration of Mother Earth (PM PRANAM), the government is incentivizing the usage of organic manure, organic & bio-fertilisers. Towards this, Coromandel has been promoting the usage of potash derived from molasses (PDM).
PDM is a by-product from the Sugarcane industry and contains a minimum of 14.5% potassium in water-soluble form. Besides being an alternate source of Potash, the product offers an organic source of nutrition and improves soil health
Strengthening upstream integration capabilities
Coromandel has a strategic tie-up with leading integrated players like Tifert (Tunisia) and Foskor (South Africa) for meeting its Phosphoric acid requirements. It has been augmenting its captive phosphoric acid production at the Visakhapatnam plant and is sourcing rock from various countries.
Coromandel acquired 45% equity stake in Baobab Mining and Chemicals Corporation (BMCC), a rock phosphate mining company based in Senegal, Africa at an outlay of INR 150 crores.
Rock Phosphate is a key raw material for manufacturing Phosphoric acid, an intermediate used for Phosphatic fertiliser production. Given the high dependence on rock phosphate imports, investment in BMCC improves its long-term sustainability and supply security goals for meeting the country’s fertiliser needs.
The Project has been granted a 20-year renewable exploitation permit in 2018 and at full capacity, BMCC can meet up to one-third of Coromandel’s rock phosphate requirement . BMCC initiated commercial rock production in 2021 and its operations are being streamlined to improve process efficiency and throughput.
Coromandel International’s subsidiary Dhaksha Unmanned Systems bags Rs. 165 Crores order for Defence and Agri drones.
Best way to play Coromamdel international through EID parry. A good buy opportunity considering the holding value and Sugar play.
- The global economy is experiencing a muted recovery with inflationary pressure and geopolitical issues persisting.
- The Indian economy is projected to be the fastest-growing large economy, with a revised GDP growth of 6.1% in 2023.
- The Southwest monsoons in India have picked up, resulting in improved crop sowing and favorable agri input consumption.
- The government has approved NBS rates for the first half of the year and has announced the PM Pranam scheme to promote balanced fertilizer usage.
- The Nutrient and Allied business segment has seen a sales volume growth of 18% in phosphatic fertilizers.
- The Crop Protection segment has been affected by industry headwinds and sub-normal rainfall.
- The company has established approximately 8,800 stores as part of the Pradhan Mantri Kisan Samriddhi Kendra initiative.
- The agri inputs consumption is expected to pick up in the second quarter with improved monsoon coverage.
- The company is committed to driving integrated farm management practices and introducing novel technologies for agricultural solutions.
- Coromandel has conducted a soft launch of Nano DAP, a nanotechnology-based fertilizer, and plans to introduce it in the second half of the year.
- The company has acquired majority shareholding in Dhaksha Unmanned Systems, a drone start-up, and is exploring growth opportunities in adjacent and step-out areas.
- Coromandel International has posted steady performance in Q1 with volume growth in fertilizer and sustained profitability.
- Coromandel recorded a consolidated total income of INR 5,738 crores in Q1 with an EBITDA of INR 709 crores.
- The company’s long-term credit rating continues to be strong, and it follows a conservative approach in hedging forex exposure.
- The Crop Protection business has grown by 17% in the export market, with plans to launch novel combination and technical products.
Positive news for fertilizer industries