Coromandel International Ltd
NSE:COROMANDEL
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Coromandel International Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '19 Results Conference Call of Coromandel International hosted by Emkay Global Financial Services. We have with us today Mr. Sameer Goel, Managing Director; and Mrs. Jayashree Satagopan, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Pratik Tholiya of Emkay Global. Thank you, and over to you, sir.
Yes. Thank you, Janet. On behalf of Emkay Global Financial Services, I would like to welcome all the participants who have logged into the conference call of Coromandel to discuss the Q1 results. We have with us from the management team Mr. Sameer Goel, Managing Director; and Mrs. Jayashree Satagopan, Chief Financial Officer. At the outset, I would like to thank the management for giving us the opportunity during this conference call. Thank you so much, sir. I would like to request Mr. Sameer Goel to give the opening remarks, followed by Jayashree Satagopan, who can take us through the Q1 performance. Thank you, and over to you, sir.
Yes. Good afternoon, everyone, and thanks, Pratik, for managing the conference call. Like you said, we will give an overview of the business environment experienced during the year, followed by company's performance and the Q&A session.Broad-based agricultural parameters have shown an improved trend over the past 1 month after a slow start of the Kharif season. First, the minimum support price for Kharif crops have been announced in line with the vision to double the farmers' income by 2022. Government has stretched the MSP by at least 1.5x to the cost of production. Government is considering MSP-based deficiency payment scheme and with performance outpace the difference between MSP and the market price, so final details are yet to be divulged.Other welfare schemes like in the State of Telangana, the Rythu Bandhu, which is the farmers' rent scheme, has been extended to 58 lakh farmers in Telangana by providing investment support of INR 4,000 per acre before the crop season. Based on the initial feedback received, the funds distributed under the scheme have been utilized by the Farming Committee towards agriculture input purchases. State government has further announced the plans for disbursement of the Rabi funds for the next month onwards.[ Remember as well ] that the GST Council has revised the GST rates on fertilizer-grade phosphoric acid from 12% to 5%. But this inverted duty structure and the subsequent GST credit accumulation is likely to come down substantially, improving working capital situation of the phosphatic industry.The government has also issued clarification with respect to the additional custom duty on the phosphoric acid sourced from the U.S., in light of the [ ensuing ] trade standoff. Phosphoric acid will continue to track the 5% custom duty, and there will not be any escalation on account of the same.Major irrigation projects in our home markets of Telangana and Andhra are progressing well. The Kaleshwaram-led irrigation project is expected to be partially operational from August this year. Once the project gets completed by 2022, it will be able to irrigate 37 lakhs additional acres of land in Telangana.Moving on, there has been a good recovery in the crops during -- over the past month. As of July 27, the total acreage under Kharif has moved up to 738 lakhs hectares, reducing the gap the year had seen against current year to 7% only. This gap was 22% by June end. With the monsoon showing up signs of revival in East, Northeast and Punjab, there's a possibility that the shortfall in the acreage will be covered in the coming weeks. In our home markets of AP and Telangana, sowing is up by 7%. There's a 35% increase in paddy acreage, while cotton has seen a marginal reduction of 3%.India experienced an early monsoon onset, followed by a gradual slowdown in the last 2 weeks of June. Since then, grain has recovered well. And as of July 29, India has received normal monsoon at 93% of the long-term LP average. Our -- or sorry, to correct that, that's 95%. Andhra and Telangana markets have received normal rainfall, which is at 95% and 102% of long-term average, respectively. South India reservoirs have seen a good inflow. And as of July 26, the storage stood at 58% of capacity versus 25% a year ago. All major dams like Srisailam, Sriram Sagar, Tungabhadra and Almatti have seen a good inflow over the last 1 month and are well above the last year level. The -- for the first time in 9 years, Srisailam has started producing power, which is a very good sign. And obviously, the excess water will be used for irrigation.DBT has been rolled out pan India. The initial challenges with respect to connectivity at farmers' ends are being resolved. However, there are still some system-related issues relating to opening stocks during quarter 1, which are now being addressed by the Department of Fertilizer. The subsidy detailed under DBT has started, and we are seeing governments settling the claims within 2 to 3 weeks. The industry and the government are engaging closely with their channel partners to ensure reporting compliance at various transaction points.During the quarter -- on the fertilizer industry performance, during the quarter, phosphatic fertilizer industry sales are -- have seen a growth of 12%, mostly moving from 32.8 lakh tonnes to 36.7 lakh tonnes, mainly on account of low channel inventory at the beginning of the season. There's also been a higher import of DAP at 20.6 lakh tonnes in quarter 1, which almost doubled that of last year level. Higher raw material prices impacted the domestic DAP production, which went down by 40% to 8 lakh tonnes. This was also that domestic manufacturers are storing the phos acid [ which is there to be converted into higher-grade NPK instead of using it for DAP. Complex fertilizer have done well, growing at 24% on both production and sales. Raw material prices remained firm during the quarter, as plant closures in China and higher global demand impacted the availability. Phos acid prices for Q2 have been finalized at USD 758 per metric tonne, up by 4% from 5 -- $730 level. In the last 6 months, the industry has resorted to multiple price increase. And on average, the DAP prices have moved up by 20% to 25% from INR 21,620 per metric tonne to 2,606 -- 2,600 -- INR 26,600 [ per ] metric tonnes. We are seeing a shift to lower grades from DAP, especially around grades like 20-20 and also having impact on single-support phosphate sales.Coming now to Coromandel Q1 performance. Coromandel had a strong performance during the quarter, improving its capacity, operational and sourcing efficiencies and customer connect initiatives despite the rapid distribution in the monsoons in our key operating markets. During the quarter, 5 new products were introduced across the business, which have received encouraging response from the farming committee. New product introduction includes in-house patented crop protection molecules, crop-based water-soluble fertilizer and value-added single-support phosphate. Our agranomics and integrated marketing structure have supported the nutritional business in improving the customer level engagement and promoting balanced nutritional practice.R&D and tech transfer teams are being centered in crop protection, and we have an exciting product pipeline. Biobusiness has been integrated, and we are working on building business synergies in research and in the marketing area. We are testing out fuel technology initiatives and product distribution and [ corporate manufacturing ] space that will help us in differentiating our products and services offering to the farmers.Coming to now Coromandel fertilizer performance. On the sales side, our phosphatic volumes are up by 5% to 6 lakhs tonne. The major share of this growth is coming from unique grades, which have grown by 29%. Its share in overall field stands at 30% compared to 25% during quarter 1 last year.The sale number for [indiscernible] comprises of 5 lakhs -- 5.6 lakh tonne on manufactured products and 40,000 metric tonnes of DAP imported. On the traded products, MOP sales are slow at 14 -- by 49% to 20,000 tonnes as business utilized available products to maximize its in-house fertilizer production. Lower dispatches from Karna impacted urea sales, which stands at 70,000 tonnes versus 1.8 lakh tonnes last year. Due -- this was also because of vehicle availability, but also the fact that -- the monsoon that was delayed in the northern UP. During the quarter, our phosphatic fertilizer plants operated at 79% capacity utilization, up from 77% a year back, recording its highest ever quarter 1 production of 6.8 lakh tonnes.Captive asset production from Visak and Ennore went up by 11%. Also, there has been a considerable improvement in the assets supplied from our joint venture TIFERT in quarter 1. Phosphoric acid capacity enhanced -- enhancement projected buyback is on track and will come up in the second quarter of FY '19, '20.On the crop protection side. Crop protection business had a good quarter, as turnover improved by 16% to INR 422 crores from INR 365 crores last year, with growth coming across all its segments: exports, foundation, domestic B2B, bio and retail. Margins are beginning to improve as our strategies [ tie ] up, and overall raw material will begin showing sign of improvement.During the quarter, the business introduced in-house patented combination molecule, Mancozeb and [ Carbendazim ] and the [ core ] marketing products. The initial response has been very good, and we expect few differential -- more differential products to be launched in the coming quarters. We have further strengthened our R&D and tech transfer functions to speed up concept to commercialization towards developing a strong product pipeline. Export growth was well spread out, with APAC, Africa, South and Central America regions showing double-digit growth. Brazil market is expected to -- higher soybean acreage in the coming season, also due to the impact of restriction of soybean exports from U.S. to China. Mancozeb capacity expansion project at Dahej is progressing well and is likely to come up by the year-end.During the quarter, we have integrated the biopesticide business, and it's showing good turnover and margin growth. Going forward, biobusiness is promising microbial pipeline and complement -- and the complementary markets will provide synergies for our crop protection portfolio.The retail business has had a slow start in the year, mainly due to the erratic rains. And lower sowing in June in AP and Telangana impacted its turnover, while Karnataka stores have progressed during quarter 1. With better rains in July, the situation has improved further. Overall sales -- shares from nonfertilizer segment has moved up to 50%. It was 47% last year. Business has opened up 16 stores in Maharashtra and are testing out technology-based new delivery approaches in other markets. Our custom hiring and service centers opened in partnership with the AP government for providing farm mechanizations are progressing well and are seeing a good demand from the farming community. While retail turnover has been a bit slow, but the margin improvement is there, and we are in line with our budget expectations.Specialty Nutrient business has strong -- seen a strong -- continues to show a very strong performance and continues its approach towards introducing crop-based solution. During the quarter, the business turned to water-soluble fertilizer, targeting sugar cane and banana segment with the help of its JV partner, CSQM. Organic fertilizer volumes are close to last year level. In the city compost segment, we continue to be market leaders with a market share of 26%. We have commenced biomining project at Visak and now have produced roughly 1,750 metric tonnes from the site. Single-support phosphate has had a very good quarter. Sales volume grew by 27% to 1.07 lakh tonnes compared to the industry -- and compared to the industry growth of 18%. Business has maintained a #1 position in -- with a market share of 10%. The business has certainly stabilized the production -- new production technology at Udaipur unit, and overall production was up by 40% to 1.4 lakh tonnes. New value-added products launched during the quarter have received a very good response. Overall, it has been a good quarter for Coromandel. We will focus on sustaining this growth trajectory by improving our level of customer engagement, built-in technology, superior farming solutions and continuing to invest in infrastructure and capability development to drive business growth.I'll now hand over to Jayashree to give the financials.
Thank you, Sameer, and good afternoon to everyone on the call. A quick view into the financial updates. In terms of turnover, in quarter 1 fiscal year '18/'19, company recorded a consolidated turnover of INR 2,528 crores, growing by 10%, with Nutrients and allied businesses contributing to 84% share and the remaining 16% coming from crop protection business. Q1 last year, nutrients was 86%; and CPC, 14%.In terms of subsidy/nonsubsidy breakup, Q1 revenue share is around 75-25. Last year, it was 76-24. Profitability. Overall EBITDA for the quarter is INR 214 crores against INR 159 crores last year. The improved profitability in Q1 can be attributed to higher sales across the businesses and focus on unique and differentiated product offerings.Manufacturing units have done well in terms of capacity utilization and operational efficiency improvements. Our raw material sourcing has been good, ensuring stock availability as per the market requirement. Sharp rupee depreciation had an impact on the raw material cost, which was partially passed on through price increases taken during the quarter.In terms of subsidy/nonsubsidy breakup. Q1 EBITDA share was 63-37. Last year, it was 59-41. Consolidated PBIT for the quarter ended 30th June 2018 is INR 188 crores as against INR 144 crores last year. PBIT shares before unallocable expenses from nutrients and allied business was 75%, while share of crop protection segment was 25%. Q1 last year, the ratio was 70-30. Consolidated net profit for the quarter is INR 90 crores as against INR 73 crores in Q1 FY '18.Subsidy. Government has initiated the process of disbursing subsidy under DBT and is settling the claims. Major system issues with respect of opening stocks have been resolved now, and we have received subsidy up to December 2017. As of June 30, subsidy outstanding is INR 2,388 crores. Last year corresponding period, this number was INR 1,745 crores. We expect this number to ease, as we are in the process of submitting the claims after June 2018.Working capital. During the quarter, the company witnessed a higher working capital situation, primarily on account of subsidy, GST credits accumulation and a higher level of plant inventory. The collections during the quarter have been pretty good.During July, we have now received a GST refund up to March 2018 amounting to INR 265 crores. We have further collected the GST refund orders for the month of April and May and expect the credit to our account very soon. The company has filed refunds up to May. Further, with the easing of GST rates on phos acid, we expect the credit accumulation of inverted duty to come down substantially, which will further ease the working capital situation.The company has consciously increased its inventory during the quarter to bulk up its stock for meeting the tariff demand. Overall, Coromandel's Q1 financials have been strong. And with the benefits accruing in terms of lower GST rates on phos acid and likely DBT inflows, the working capital situation is likely to improve in the coming quarters.Thank you all for the participation, and we now can open the Q&A session.
[Operator Instructions] We take the first question from the line of Kashyap Pujara from Axis Capital.
I have a couple of questions. One is more strategic, and the remaining are more bookkeeping in nature. So sir, the question for you is that if I look at Coromandel's performance over the last 10 years, we basically -- the peak performance in [indiscernible] after which we virtually had the net profits, which came to close to INR 350 crores, INR 400 crores. And from there, we again crossed a new high in the last year. So the key question is that in the last 2, 3 years, what has been done to basically mitigate the cyclicality of the businesses? So while I understand that agriculture inherently is a cyclical business, but within that, what is Coromandel doing to actually ensure that there is some sustainability of growth which one can see and such kind of fortune swings -- dramatic fortune swings are minimized to the maximum extent?
You had some more questions or...
Yes. The remaining are more bookkeeping. I wanted to basically take some breakups. So I missed the EBITDA contribution about subsidy and nonsubsidy business. So that is one figure I wanted. And if you could also throw some light on what is the kind of revenue we have in the phosphatic fertilizer and SSP. So the fertilizer side put together, the Specialty Nutrients and organic fertilizer side and the retail side, if you can break up that also, it will be more helpful.
Right. So I'll answer your first question, and then Jayashree can answer the others. On the phosphatic side, obviously, we are -- monsoon does play a role. But the good thing is that government from their side and even outside governments are doing a lot to change the cyclic nature of this monsoon, and a lot of activities have been done. From governmental side, we have a couple of things which we have done in the past few years. One is to ensure what is called the end-to-end planning across businesses and SKUs. So no longer it is that we have a shortage in a particular material like phos acid. And therefore, the whole manufacturing and marketing plan depends on what acid is available and therefore, how to convert. We have a full end-to-end visibility. And now we are -- like with our unique grades and products, we are actually giving what the farmer wants and therefore, continuing to build that base. And that has really helped the business because we can -- we keep increasing the share of unique grades, which is a way we get, obviously, higher margins on that comp. The other thing which has been done is to improve, firstly, plant efficiency and to ensure that our capacity utilization keeps going up, and that is something which we are seeing over the years happening. And therefore, there's a lot more emphasis on our own manufactured products, including phos acid and production, what are the intermediaries we -- and also using of alternate rocks and asset strategy which helps us to diversify others. So that becomes a second thing. And we are increasing our operating efficiencies across the plants. The third is to strengthen our marketing. So what we have done now from the -- by introducing unique-grade products, we have actually integrated our marketing structure on nutritional marketing. Early on, we had each of the SBUs having separate marketing. So [ SND ] had a separate marketing, SSP had a separate marketing. And also organic has separately integrated the whole thing into -- integrated nutritional marketing structure, which basically means that we got closer to the farmer. And this has also helped us, with the DBT scheme happening, this is the game now is playing more at the farmers level, and what sort of farmer connect we have as opposed to, early on, we post the stocks across the dealers. So that has changed. And on top of that, what we have done is to build up an [ agrinome ] scheme, which is basically what we call to manage the permit of influence. And this is done crop-wise to help us to create the demand at the farmer level. And that's the reason why you see our market share increasing in our captive markets. And also not only that, but also we are able to increase what is called the consumption levels. That's on the fertilizer side. At the same time, there's an increased importance, and these businesses are growing faster because they have higher margin like our specialized nutrition market, including our tie-ups with the team, our organic and also our retail nonsubsidy business, which has been the emphasis. In the retail side, what we have done is to ensure that we continue to increase our profitability by the stores and also reduce any of the loss-making stores and increasing our category focus into nonfertilizer. So the fertilizer actually gets us the footfall, but it's the nonfertilizer which the farmer is buying -- is getting. And it also helps us to look at the adjacent categories, including insurance and credit, which helps the farmers to increase the footfall. So our retail business has been turning profitable quarter-on-quarter on that count. The emphasis is on increasing our focus on nonsubsidy business, like I said, [ those are ] including crop protection. One of the things which we are doing is to increase our capability of transferring new products -- increasing new products into the market. What we alluded to, we are very happy to say that we have introduced new products in the market, which are combination products. Five of them have come in the market. And this year, on crop protection, we do expect a number of other products to be introduced in the market. And roughly around 8% of the turnover will be with new products, which is on higher margins. So that is something which we are looking forward to. So -- and our strategy continues to be providing the best solution for the farmers and basically increasing our customer connect. And that, I think, has -- from all the agri input side and not just one particular side, and that I think has been a strategy which have been -- will pay off.
Sure. Actually, it will be helpful if you could give some breakups on the retail and the specialty products because those are incrementally getting more chunkier within the nutrient and allied businesses as a segment. And maybe the growth profile of these businesses and the profit margins -- or the gross margin of these businesses will be much better -- or arguably, the return of the retail business being a sideline will be much better. So if we can actually understand that those businesses are scaling up much more and the 5-year outlook, the character of the business will be completely different. That could actually help us understand the quality of the business much more.
So we don't give the breakup on the sector, but what we can say is that these businesses are growing both at the top end and bottom end by a high double digit -- very high double digits. So that's how we are increasing the business. And our intent in the long run is to take our subsidy to nonsubsidy business to be 50-50 on the bottom line.
Sure. And could I have the breakup of that current EBITDA? How much is subsidy versus nonsubsidy? I just missed that.
Yes. Subsidy versus nonsubsidy is 63-37.
In this quarter?
In this quarter. And nutrient and other allied business versus crop protection is 77-23.
77-23. And what is the same computation in the prior year?
Prior year subsidy versus nonsubsidy EBITDA is 59-41, and the nutrient and other allied businesses versus crop protection was 72-28.
Sure. And I just have one last question. Apologies to have taken up so much time. That is regarding the working capital release because, given the inverted duty structure which now goes away, and I think you were mentioning on the call last time that there was INR 800 crores worth of subsidy outstanding which was to come. I don't know whether that has come or that's still pending. If you can just give a sense as to how much cash flow do you actually expect this year, based on receiving subsidy outstanding. So what the end of year figure should look like? And how much will be the working capital benefit because of the credit accumulation going away?
The credit accumulation of inverted duty is likely to benefit about INR 200 crores in terms of working capital on an annual basis. And as far as subsidy is concerned, we had a total of INR 2,388 crores outstanding as of June, out of which INR 1,000 crores close to -- relates to DBT. So currently, we have generated claims up to January 2018. And once the issues with this site is sorted out, it's a question of a couple of weeks that we will be up to speed up to June 2018. And what we understand is once these bills are generated and submitted, the government is actually clearing up DBT at a faster pace in, say, about 2 weeks' time. We have received DBT claims of close to about INR 98 crores so far.
So what he's asking is -- the good thing is that after this -- all the DBT claims will be through the POS machine. So it's no longer this 90%-10% which we had and especially a backlog on the balance 10%. And we have already seen that in the case of urea. The government is clearing it within 7 days, which is a very good sign. There's enough funds currently available with the government for the NPK sector. So once this process is streamlined, that will be -- get cleared within let's take an outer limit of 14 days. So now this is all electronically driven through POS machines. So that is something which is there. And we are seeing a very good things on recording on the POS machines. We have set up a full team to ensure that we educate the dealer and retailers in our markets so that they can use the POS machines. We're also finding that if we look at the POS machine, our market share is actually going up.
We take the next question from the line of Sudarshan Padmanabhan from Sundaram Mutual Fund.
Sir, my question is on the phos acid. I mean, if I remember correctly, in the fourth quarter, you did mention that there is -- even if you're looking at the annual report, there has been a fair amount of buildup on the inventory side, and part of it are largely coming in from the raw material side. So if you can give some color on -- while I understand that you would have gone into an agreement specifically at -- in a certain rate, but we would also be benefiting from low-cost inventory, especially in the light of us taking some kind of price increase. So I mean, would -- as we move to the second quarter, would we still continue to benefit from the low-cost inventory? Or the additional $20, I mean, [ 6 30 ] to [ 6 50 ], which we have contracted for, I mean, have we taken price increase for that as well as the rupee-dollar movement? And if not, what is the probability of us taking another increase after we've already taken the INR 2,000-odd?
So you have a couple of questions you're asking. Firstly, our commercial team works well in terms of forecasting how the price increases are happening. And we do contract -- if we find that the price may go up, we do contract earlier, and that's why the inventories have gone up for not just phos acid, but for other raw materials also. So that is something which we have done, and that's -- that gets reflected in the higher inventory. The other thing is that as far as -- we are looking at the exchange rate also. In DAP, we have covered for 3 increases on that. In the NPK side, only 2 increases have been given. We'd better watch how the situation is, but we are able to increase prices in line with what has happened with DAP.
And I mean, what would be the -- I mean, the cost of -- average cost of phos acid in the first quarter, sir? I mean, if you can give some color, if not the exact figure.
It should be around close to $700, slightly lower than that.
Okay, sure. And the second question what I have is on the crop protection business. What we're actually seeing across is there has been a sharp increase in the raw material prices, especially because of China. With the light of us putting up additional CapEx, if I'm correct, we put an additional 10,000 tonnes for [ remainder ].
Yes. Hello? Hello?
Ladies and gentlemen, we've just lost the line with the management. Please stay on line while we connect them back to the conference.[Technical Difficulty]
Ladies and gentlemen, thank you for patiently holding the line. We have the management reconnected to the call.
Yes. Sorry, Sudarshan, we got disconnected.
Sir, we've lost the line with Sudarshan also. We will proceed with the next question. It's from the line of Mr. Nitin Gosar from Invesco Mutual Fund.
I just wanted to understand on the product level, macro level how the imports versus -- and the business product [ increasing up ] for India? And secondly, where are we on utilization for [indiscernible]?
Right. So Nitin, we have given that call in terms of the utilization levels. So our utilization level has actually gone up. Yes. You got the number, yes.
Yes. Our planned capacity utilization during the quarter was 79%, which is up from 77% a year back.
Got it. And [ help us see how macro shipping on ] [indiscernible] indigenous production?
So in terms of DAP imports, we saw higher import happening during the Q1.
Okay. So I guess, to understand, we have all the [ archives ]…
[ We're just looking for the ] figure for that.
Yes or no? Yes.
Just looking at the overall DAP import, DAP import had a growth of 26% April to June, while the production growth happened by 7%. So there was an increase of DAP imports that's happened. Sorry, this is on MOP, [ this one not DAP ]. My apologies. So DAP import went up from 10.98% to 20.63%, which was an increase of 88%, while the production actually came down by minus 40% on DAP. The main reason here was that the companies were actually keeping the phos acid mainly for NPK and at the same time, contracting now for DAP. And there were some traders who were trying to import DAP [ now ] because they didn't import this in the month of February-March. So that's happening. As far as NPK is concerned, the production grew by 24%, while the import growth was only 11%.
Yes, okay. So now incrementally, you're trying to move towards complex NPKs rather than that [ production ] capabilities?
No. The way it operates is -- I can just talk about our company. We normally like to manufacture NPK grades and also look at -- given that, also selling unique grades because that is what the farmer demands. DAP, we just keep for additional -- utilizing our capacities additionally or look at even imports at times, if we find that there's an optionality, we think, for DAP import, which we mainly did for our institutional sales.
Okay, got it. Secondly, sir, you mentioned in the opening remarks that there is a shift from low grade -- shift towards low-grade DAP, which is...
No, I didn't mention. There's no low-grade DAP. What is happening is that the DAP price is going up. The farmers are now looking at shifting to grades like 20-20, which is basically is priced much more better than DAP per bag.
Okay. And sir, last question. You mentioned [ unique grades but I missed ] on that number. And within our overall production, how much is NPK right now versus DAP?
So in terms of overall sales, our unique grade stands at 30% compared to 25% last year.
And we have all our production coming from NPK and we don't manufacture DAP [ right now ]?
We had a small listing...
We had a small.
Small listing for DAP. Last year, we didn't import anything. We just manufactured DAP.
Our DAP manufacturing during the year is 1 -- during this quarter so far is 1.32 and complex is 5.52. Total production is 6.84.
We take the next question from the line of Resham Jain from DSP BlackRock.
Sir, my -- just one question. You mentioned on DBT that our -- the new DBT, our outstanding is quite high as of now. But you also mentioned that within 7 days of build raising, you are able to get money from the government. So I was just trying to understand, is it a delay from our end? Or is it a delay from government and in terms of the release of subsidy of the -- under the new DBT?
So what I mentioned on the 7 days was when the DBT claimed to what is called the e-POS machine, which is going to be -- which is going to be -- which is basically all system-driven, then the government has promised that they will give the base -- give them 7 to 14 days. So that's once the entire e-POS machine system kicks off. Currently, we -- this is as per the whole scheme, we're having claims bought on the -- on what is called a 10% share. We have 10% balance claims also in terms of the grade and other things. And what -- even on the DBT submission, we are doing month-on-month, where there are system issues at the government level between the 2 systems, and we are trying to get that rectified. The government submitted up to the month of January, and we are going to submit the other months up until the month of June. There's not a delay from our side as much as the 2 government systems, which I am -- they are more talking to each other [ little by little ]. We have the added problem as far as AP and Telangana is concerned. One was the APTD got bifurcated, and then Telangana government actually ended up having -- increasing the number of districts from 23 to 46. So that became the additional problem.
And sir, one more question. On the overall EBITDA percent which you always give that in terms of the overall -- your guidance going ahead, this decreasing prices of phos acid, do you feel that in the coming quarters, you'll able to maintain whatever we have done in the previous year, last year?
Yes. I would estimate in terms of the ability for [indiscernible] remains the same, but we [ gave some pricing ] in the past to offset the raw material and exchange impact.
And as long as we continue to do 2 things: one is increase our share of unique grade, and also to convert more rock into phos [ that should continue. ]
We take the next question from the line of Dheeresh Pathak from Goldman Sachs.
Can you give the manufactured volume numbers, NPK volume numbers for the quarter?
Is this for the Coromandel or for the...
Yes, Coromandel, for the company.
One second, just hold on.
Yes. The manufactured is 5.6.
Lakhs?
Yes, lakh tonnes. And for imported, it is 0.4 lakh tonnes.
0.4? This includes both NPK as well as Urea, right?
No, this is only the NPKs.
Okay. And the Urea at present?
Urea we had 0.72 lakh tonnes.
0.72 lakh? Okay. And the manufactured in volume includes SSP volume, right? [ After you break out the ] [indiscernible] [ volume ].
No, only NPK.
Only NPK. So what was the SSP volume?
It's at 1.22.
Sales is 1.07, production is 1.17.
1.17 lakh, okay. [ I see, okay. ] And this a reduction of custom duty and phos asset leading to INR 200 crores of working capital reduction, can you just explain? I'm not familiar with what was the impact earlier and why it was impacting?
So when we end up paying a higher import duty on our inputs, 5%, fertilizers output latest 5%. So the differential can be claimed by way of [ reasons ] from the government. And we keep filing our GST refund returns on a monthly basis. From July '17, when GST was implemented, the sites had numerous problems and we were able to submit the claims up to March '18, only April '18. And we just received the credits for that period to our account yesterday. So there is a lag in terms of working capital. You will eventually get the money, but it might take more time to get it into your account. So that could amount to up to INR 200 crores.
Okay. INR 200 crore is the reduction in working capital or it is the cost of servicing that working capital?
It is a reduction in working capital.
Reduction in working capital? Impact on P&L would be like 8% of this, right?
Yes. Close to that.
Just to put that early on, the duty on phos acid was 18%. We made[ an appeal ] to the industrial body to get it down to. And finally, they agreed at the first meeting to get it to 12%, because there was the inverted duty structure, which you have there. Now [ that well ] has been reduced to 5%, so no longer we'll have this issue of inverted duty structure, [ the more rate it gets ].
Okay. Just to confirm, for all the grades of NPK as well as MOP and SSP, the output GST is 5%?
Correct.
And for the input which is phos acid, it is now at 5%. Ammonia is 1% to 5%?
No, ammonia is 18%.
So what is the [indiscernible] in ammonia?
What happened is when you look at the rates, it's around 5% plus 1%, so it becomes 6% as [ the output ].
So why you will have 18% as input for base on ammonia, based on your total sales that happened within the state of Andhra Pradesh. We will have enough credit to utilize. There will be some small amount of inverted duty, we can claim it. Or if we plan our returns in such a way, we will be able to utilize the credit accumulation in our comps. So that's not a substantial sum.
Okay. Because I'm sort of pricing also, right? Because of the value add and the pricing of ammonia, you're saying, net-net, the duty on the [ import will not get lost. ]
It will also cost the business, it's not just [ for the ] fertilizer. But the [ pension ], we can take that. It's a part of the business, that's why it's [ common like it is ]…
We take the next question from the line of Abhijit Akella from IIFL.
Just a couple of clarifications on the numbers. The 5.6 lakh tonnes of manufacture, how much would be DAP out of that? Is it about around 1.5 lakh?
1.28 is DAP, complex is 4.33.
Okay, 4.33. And this total 5.6 is a little bit down from last year. Is that correct, ma'am? Last year was about 5.72 if I'm not mistaken?
Correct. Our DAP production has been lower this year. Last year, We had 1.72 lakh tonnes of DAP production. This year, it is 1.28.
Right, right. In terms of...
Sorry. Last year, we had 1.77. This year, it is 1.32. What you were referring to, this is 5.61 is the sale at total production of 6.84. DAP is 1.32 and complex is 5.52. Last year corresponding period production at 6.61, with the breakup of 1.77 and 4.84. Our production has gone up compared to last year.
Right. I was referring to both sales and demand. So sales is down by about 2%, but the production has gone up year-over-year, you are saying, right?
Right.
Last year, there was a bit of an impact which we saw, because if you remember, the GST got implemented. So end June, and especially in our retail outlets, we saw pickup on sales because the farmers were actually expecting a 12% GST rate to come, which at the last minute got changed to 5%. So because of that and earlier rate before [ the back -- in the back ] was around 5% to 6%, depending on the state. So there was a lot of purchase which happened just preseason.
Understand. Got it. In terms of the competitiveness of domestic manufacturing versus imports of DAP sale, how do you see the current situation? Is the increase in phosphatic prices far outstripping the increase in DAP prices overseas? And therefore, has it become more competitive to import DAP into the market?
No, I don't think it was [ DAP ] imports. So with the dollar not changing and depreciating imports are actually quite -- I mean people have taken price increases, and therefore, you saw the third price increase happening. So domestic manufacturing is always more profitable. We had the issue of inverted duty which has now got converted. And our whole idea was to convert more and more of acid, which we have brought into NPK because that makes more sense.
Right, right. So on a full year basis, last year, we did about like 6 lakh tonnes of DAP, maybe 6.3 lakh tonnes. Is it fair to assume that we'll be at a similar kind of number this year also in terms of full year?
What was last year?
The last year, we had...
In terms of sales, I'm talking about.
Yes. In terms of sales, we had close to 5.4 lakh tonnes of DAP sales. It would be around those numbers.
No. It is early prediction, but like I was saying, there is still a shift from DAP because of the high price hike and this happened a couple of years back on -- 7 years back, into what is called other grades of NPK and which we, in a way, are happy because other thing is to keep selling more of unique grades and increasing that share.
Sure, sure. Got it. And the one other thing on the subsidy itself. You mentioned that INR 1,000 crores out of this INR 2,300 crores is the DBT-related subsidy. So the rest, I presume, is the pre-DBT system. Is that so?
That [ is ] actually [ 3 at 10% ] balance, so those are -- and the good news is that the governments early on were not processing the 10%, but now they have started processing and giving that it's just a reconciliation with the government has to do in their system. And there are 2 systems which operate because, which is something which they have to do. And we are working with them towards that. Hopefully, these things will get resolved very soon.
By the end of the year, would it be fair to make an assumption that 1% to 10% subsidy is hopefully clear in coming months, the year-ending subsidy outstanding could be considerably lower than what it was last year? In last year, we ended at INR 2,600 crores or so.
For the industry, I mean if you're commenting for the industry, we need to wait and watch because, obviously, the days of allocation done on subsidy for urea and for NPK. The good news is that government recognizing the fact that urea is getting diverted has decreased the subsidy on urea. As far as NPK is concerned, that subsidy ratio has gone up, so hopefully, we should have enough of subsidy to clear up this backlog. What the government has [ said ] is once the DBT system stabilizes, because they do expect overall subsidy claim to come down further, because any of the diversion and all gets cleared up. The other thing that we will be in a position to [ because of ] financial industry for more budgets. But it's something which is there. We do [ really actually ] expect the government to give what they did last time because now the claims will be to look at past machine, and therefore, it's already submitted, will be in terms of giving us the what is called the special banking arrangements.
Okay. One last quick question, sir, and I'll get back. Just in terms of the -- you mentioned, you talked about the some of the [ teething ] problems related to this DBT implementation, in terms of farmer connectivity and all that. Is that having any material impact on just the offtake at the retail outlet level? Or you think it's not significant, and overall industry volumes et cetera will just continue unimpeded because of all these issues?
It's just early days now to talk about this because this is the -- as we speak, we speak about purchase season. We have to test -- we have seen that the storm does get slow down a bit. But what the -- I understand -- there are 2 things. Firstly, at our [ own ] retail level, that we are [ very in ] touch with the the farmers. We have given them additional POS machines. So that is now through, so we have identified that 300 major stores and given them additional POS machine. In a way it's a positive thing because then the farmers don't see any [indiscernible] [ cost ] on that. As far as the system slowdown is concerned, my understanding is what the former does is they keep the [ belts ], they hand over the product, do the thing but do the billing later. So that is something which we do once the system opens up. But the government is being talked about it as the industry also, yesterday, we had a meeting. We have said that we'll work with the government to somehow work on the robustness of the system. So that we don't have any subsidies, as I said, but it's early days currently.
[Operator Instructions] Next question is from the line of Bhavin Chheda from ENAM Holdings.
Sir, in case of a crop protection business, how much was the export business this quarter, and what was the growth rate on a y-o-y basis?
Yes, we'll just give you that number on the export side.
Year-on-year growth is 17% overall.
Overall exports?
Exports. Just hold on a minute.
That will be largely crop protection, right? You don't have anything in Nutrient [ NI ].
Yes.
It's [indiscernible] [ gone up ] 46%.
In crop protection?
Crop protection.
And absolute numbers, if you have?
We don't give that data.
Okay. Second question, how much of the phos acid requirement are now captive the in this quarter?
Sorry, what percentage of...
Phos acid from your own source and how much is outside?
Well, we had 52,000 tonnes of phos acid which is captive.
Right. In this quarter?
Yes.
Okay. And how much would be outside purchase right now?
We normally don't share those numbers.
Okay. If not in tonnage, then on percentage basis, how much phos acid it would be? And this 52,000 includes deferred, right?
[ Just asking ], we have various sources of giving us phos acid, so and TIFERT is one of the source and [ PHOSCO ] which is our other JV is also another source.
Okay, okay. And last question on the volume guidance, if any, on the NPK FY '19, what kind of capacity utilization or volumes you are looking at?
So we don't generally give out volume guidance.
You normally give capacity utilization, so what kind -- if you -- any guidance on capacity utilization?
Just on this, our objective is to continue to increase our unique grade share, and that is something which is there. And the whole thing is about -- not about volume generation as much as quality generation in terms of selling the unique grade sales. So that we want to take it up to 43% is -- yes.
From 30% to 43%?
The 30% is [ now in the ] quarter. Last year, I think we ended up at 38%, from 38%, we need to go to 43%.
We take the next question from the line of Sumant Kumar from Motilal Oswal Securities.
Sir, my first question is regarding other expense. So we have seen a significant increase in other expense in Q1 FY '19. So what was the key reason for that?
So there are 3, 4 reasons that other expenses have gone up. One is on account of exchange impact, which is a forward premium that we have incurred in covering our exposures, and also the mark to market. Secondly, compared to the same quarter last year versus this year, we had a slight increase in the rental for DBT. There has also been some increase in stores and space across our plants. We have seen some powers cost going up, especially in Gujarat. So these are the 4 reasons why we are seeing an increase in the other expenses.
What was the exchange impact in Q1?
Exchange impact is close to INR 35 crores.
Okay, okay. And this quarter, we have seen around INR 878 crores stock adjustment. So this adjustment is mainly related to fertilizer or crop protection also?
This is mostly relating to fertilizer.
So how much is [ relates to ] fertilizer?
Fertilizer, for most -- you can take 90% of that relating to fertilizer.
Okay. So can you tell me how much is inventories we have? All the inventories in tonnage or anything like that?
We have to come back to you in terms of hedging. We can take this off-line.
We take the next question from the line of H. R. Gala from Panav Advisors.
The quantity numbers which you have shared, there is no clarity. Let me just tell you, when Q1 FY '18 con call was there, you had said that the sales manufacture was 0.29 lakh tonne. Against that, how much you have sold in this quarter? I'm talking about sales, not production.
Just 1 minute. So total sale during this quarter...
Of DAP?
Yes. Total sale is 6.01, out of which, DAP is 1.28.
Okay, so 5.6. Because some time back, you said that 5.6 is the total sales of manufactured products.
Correct. And then we had a sale in quarter which, is 0.40, so 5.61 plus 0.40 adds up to 6.01, total sales during the quarter.
5.61 is the sale of complex, it's right?
No, 5.61 is the sale of our own manufactured products, DAP plus complex. DAP is 1.28 and complex is 4 point ...
So that comes to 6.01.
Correct.
Okay. And how much was the total trading volume vis-a-vis 2.95 lakh tonnes in the first quarter '18?
6.85? [indiscernible] So we have urea, MOP and I'll give you those breakup. Last year, we had urea and MOP: 1.76 of urea and MOP of 0.34. This year, urea is 0.72 and MOP is 0.17.
0.17. And how much was SSP?
The SSP total sales last year was 0.84. This year, we have given you 1.07.
1.07. Okay. So that clarifies the situation. Just a request to the management. There a lot of time on the con call is wasted just to understand the production and sales number. Can you not give that in your press release, so that we can concentrate on some more strategic matters anyway? Please consider that suggestion.
Sure.
Sure.
Yes. The second question is what kind of capital expenditure you will have this year in FY '19?
So this year, we have planned approximately INR 500 crores of capital expenditure. This is between the phos acid plant that has been put up at Gujarat and some expansions planned for the CPC. [ All-in about it ], we also have our normal capital expenditures that we incur on a year-on-year basis.
Okay. So can you give the breakup how much will be the phos acid?
The total phos acid plant is about INR 276 crores, which spread over 3 years. And for this year, for CPC, we are estimating about INR 90 crores to INR 100 crores of CapEx. And for all the other plants put together, we are estimating close to INR 100 crores in terms of the normal capital expenditure that we incur on a year-on-year basis.
Okay. So that is INR 200 crore and INR 276 crore over a period of 3 years?
Yes.
Okay. So that is quite fair enough. Another question is we have always been discussing second manufactured fertilizers ...
[Operator Instructions]
I know, I'm talking from the handset only, madam. On manufactured fertilizers, we are seeing that we are earning about EBITDA margin per tonne of something around INR 2,200 to INR 2,500, because the selling prices, the subsidy levels and your raw material costs keeps on fluctuating. So does it [ whole book ] in this quarter also?
Okay. When we talk about INR 2,200 to INR 2,500 per metric tonne, this is on an annualized basis. Given that there is going to be some quarters where you might see a raw material price increase [ on ] an exchange movement, we also see the benefits in terms of higher pricing coming over the quarters. So on annualized basis, we expect that INR 2,200 to INR 2,500 to stand good, even for the current year.
We take the next question from the line of [indiscernible] from Dolat Capital.
My first question is on the [ current scheme ] of the government. I just wanted to get feedback on your side in terms of [indiscernible] on implementation. And you have also mentioned in your past annual reports that [ the consumption ] has been includes the [indiscernible] price gap between urea and complex fertilizer.
Yes, please go ahead.
Yes. So do You see the [ health cuts converts ] this price difference are [ healthy and the ] [indiscernible] consumption towards complex fertilizers [indiscernible] balance for that matter?
So just to conclude your first question, [ over ] 10 crores of [indiscernible] distributed between '17 to '18. And [ the government has to ] also distributed another 5 crores more, right, for the second half. So that is as far as the [ soil health ] concern is. This actually a massive education program, not just on the -- it's not just about the NPK, but it's also about what the micronutrients which your soil has and have your soil has deteriorated, even in terms of carbon and all. But to have what is called proper balanced nutrition, you have in our retail outlets and we do our own soil that we started this well before the comments started, what is called a soil manager program. It basically talks about that if you manage your fertilization and also using of organic and other things properly, we actually say this could be a return on investment. So I guess the government also objective is to reduce the ratios of N which is therefore to leading other environmental issues towards NPK coming up. But that will be an education program which will be there. It's the government and all other agencies have to do along with, including [ the agencies ] and all.
So if it is my correct my understanding, I was under the impression that after the soil [ held cut ] probably you'd be given more subsidy, based on your requirement for NPK in the soil as determined by your soil test...
Probably could be the intention of the government going forward, not immediately. When the DBT scheme is implemented in full, [ they will ] probably the recommendation will come that if you are growing for this particular crop, this is the type of balanced nutrition you need. At that point of time, they may say, look we will give you assuming you are needing just 2 bags and using 4 bags of [indiscernible], they can say you will get subsidy on 2 bags and not on the other 2 bags. But that will take some time plus I think the whole DBT and the process to stabilize.
So that would be another 5 years, would that be correct?
We can't say that, but the government is quite keen on being the NPK [ environment ] and also the soil rejuvenation to improve productivity.
And with the softening of, given commodity prices also have an increase and [ conventional consumption of complex fertilizer ]?
Sorry?
The softening of commodity prices globally for [ Callife ] produce, would they a consequent implication on consumption of complex fertilizers in the country?
There are various reasons why the consumption happens. You have a good monsoons, if the irrigation increases, more and more farmers come, then the consumption itself goes up. Even in the case of this season, if -- where the prices of the fertilizers are going up and now with the government actually ensuring that [ then one ] has to see the implementation that you get 1.5x the [ Callife ] input cost [ of your thing ], which includes fertilizer. So there are various factors that impact that. Definitely, there will be some shift, if one fertilizer grade is higher-priced as compared to others, especially the imported DBT and will be shift in consumption to other fertilizers from the farmers' choice or even to [ single support grades ] which is what we have seen in the market.
Sir, in your quarterly result in this quarter, you had a good result and one of the reasons that [ I can actively that ] is to almost a fixed [ creating a ] distribution expense will not increase. So is [indiscernible] is it because of distribution that discontinuing [ its ] profitability or [ is it a ] realization [ trend ]?
As we mentioned earlier, there are multiple factors that have actually led to the good result. One, we are seeing that the sales per se has -- the revenue per se, we've seen a growth. Secondly, it is also operating efficiencies, both at the [indiscernible] plant as well as the logistics levels. Third, we have also seen that the raw material sourcing has been done in a smarter way. Fourth, to compensate for some of the increases that we have seen in the base raw material as well as exchange fluctuation, we've been able to take some price increases and maintain those. So it is a combination of all these 4 that has actually resulted in the good results for the quarter.
And of course, increasing the share of unique grades.
Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to the management for their closing comments.
Right. Thank you, everyone. Thanks for the time. Sorry for the disconnect which happened in between. But we are very hopeful with the monsoons going the way they are and the predictions from the monsoons, especially in our emerging markets and the type of efforts which both the government is putting and with the company also fully geared up on being right on strategy, we expect the momentum to continue.
Thank you, everybody, and appreciate your interest in Coromandel.
Thank you. Sorry, sir, please go ahead with your closing comments.
Yes. On behalf of Emkay Global Financial, I would like to thank all the participants this call. I would also like to thank the management for giving us the opportunity. Thank you so much, sir.
Thank you.
Thank you very much. Ladies and gentlemen, on behalf of Emkay Global Financial Services, we conclude today's conference. Thank you all for joining us, and you may disconnect your lines now.