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 Coromandel International Q2 FY '21 Earnings Conference Call, hosted by Antique Stockbroking Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking Ltd. Thank you, and over to you, sir.
Thanks, Ivan. On behalf of Antique Stockbroking, I would like to welcome all the participants on the call of Coromandel International. From the management, we have Mr. Sameer Goel, Managing Director; and Ms. Jayashree Satagopan, Chief Financial Officer, on the call. Without further delay, I would like to hand over the call to Mr. Goel for opening remarks. Over to you, Mr. Goel?
Yes. Thank you. Good afternoon, everyone, and thanks, Manish, for organizing this conference call. Firstly, I hope everyone is safe and keeping healthy. I mean we are still in a pandemic, and it will be very wise that we do all -- keep always social distancing and we are working from home. That's how it is. So I'll quickly give overview of the business environment experienced during the quarter, including the current situation, followed by company's performance and Q&A session. During the first quarter of FY 2021, the Indian economy was severely impacted, as you know, due to COVID and registered a sharp decline of 22.8% in its GDP. Having said that, agriculture was a bright spot. It grew by impressive 3.4%, backed by a bumper Rabi harvest and good monsoon during the Kharif season. The good news is that when you look at the economy, a lot of indicators, even in October, are showing green shoots, and a lot of economic sectors are back to the pre-COVID level. As far as agriculture is concerned, the government actually -- and the world actually started looking at agriculture as one thing, which has not only helped to grow the economy, but also in terms of feeding the millions of population. So the government announced various stimulus packages, and the Reserve Bank of India softened the interest rates to support for the ailing economy. After the lockdown, we have gradually opened up in a phased manner. And as I said, it is good to see the arrival of GST collection, power and fuel demand, increase in -- railway freight increase and manufacturing PMI, which are all leading to improved sentiments. However, the rural economy actually continues to be a bright spot with 2 consecutive years of above normal rainfall, which has been unprecedented. And there is a prediction of having a bumper harvest in Kharif, although rains in the -- rains which happened in the second half, in September, actually did dampen some of the crops. The country has witnessed above normal rainfall, which is above 9% increase. Southern markets where we operate had an increase of 29%. The reservoir levels are good and better than the 10 years average. Like you see in the sowing areas, this has been 6% more for the country as a whole, higher than last year, and 104% of the normal Kharif at all India level. Main crops, cotton, have grown by more than 106%, rice at 102%. Oil seeds and pulses, which the government wanted to promote is 111% and pulses at 108%. But the main thing we see is AP, Telangana. Particularly Telangana is now turning out to be the rice bowl of the country, right, and the sowing has crossed a normal area by 112%. With rice being at 138% and cotton 126%. And these are ones which do consume a lot of agri inputs. The government policy -- am I audible?
Yes, sir, you're audible.
At least I hope I'm audible. Thank you. The government policy in the center and state continues to be proactively supporting the agriculture activity through policy measures. The Parliament recently passed 3 agriculture reform bills to liberalize the long-shattered agriculture market. These reforms will lead to much improved price discovery, better storage infrastructure and improved ability for the farmers to sell their products to corporates instead of going through the Mandi systems. So these reforms if implemented properly, please do remember it's also a state subject, have the power to bring in structural and transformation changes in the Indian agriculture over the medium and long term. Further, the government has announced an increase of MSP upfront on the Rabi crop, with its objective to provide minimum 50% returns on the cost of production to farmers. To ensure liquidities in the market, the government has plan to increase the procurement of rice during the current marketing season to 50 million versus 42 million tons last year. It is also to augment the food program, as we -- they have done free distribution for the migrant labors and other weaker section, is to ensure that the food stability is maintained. The process is already initiated and is on track and close to around 30 million tons have already been procured. COVID-19, I think, as far as agriculture is concerned, the center and state government has taken proactive approaches in dealing with the pandemic. Overall testing and medical infrastructures have been strengthened. With higher testing, there was a rapid increase in the number of positive cases getting reported. The early indication is also helping in ensuring timely medical care for those infected and further containment of the pandemic. Indian casualty rate is much below the global average. The recovery rates in the country has been on the positive trend, and currently is at greater than 90%. Over the past 1 month, the number of cases reported have come down in India, having its peak in end September, early October. Further, the government is gradually easing the lockdown in a phased manner keeping safety in mind, and this is helping the economic recovery. However, we need to be cautious, like we saw in Kerala, after the Onam, that with the festive season, the spike doesn't come back. As far as the DBT and subsidy is concerned, the subsidy disbursement started on a good note in July. However, it got into a challenging situation for the remaining part of the quarter with the reduction of subsidy allocation, especially ingenious P&K companies that the government prioritized, and they wanted to give some more to the urea companies who are having a huge backlog. The Commission of Agriculture Cost & Pricing has recommended that subsidy of around INR 5,000 per year. This is not new, but they are again recommending, should be transferred to all the farmers in 2 installments of INR 2,500 each at the beginning of Kharif and Rabi. This will ensure that at least 82% of the farmers who are small and marginal do get subsidized fertilizer. However, it will impact the -- especially on the urea side, it will impact the farmers who have large holdings. As far as the fertilizer industry is concerned, phosphatic fertilizers saw a very increased uptake in volumes in Q2, driven by favorable weather and market conditions. Given the good monsoon, the industry registered good growth during the quarter. NPK sales improved by 20% to 72.9 lakh tons. Complex fertilizer sales increased by 11%, led by DAP at 30%. Phosphoric acid prices for quarter 3 2020 has been finalized at USD 689 per ton. In quarter 2, the price was USD 625 per metric ton. The prices of other raw materials have also been seeing a gradual uptrend as the economies pickup. Coming to Crop Protection business, demand of crop protection chemicals continue to be good through the second quarter. Excessive rain in the later part of the quarter has impacted pest infestation and hence result in sales. The industry through the technical task force formed by CCFI. This is the Crop Care Federation of India, has been -- has represented to the government on the draft notification relating to the proposed ban of 27 molecules. It has submitted its detailed reply to the government within the time line prescribed. The industry is hopeful for a favorable resolution.Coming to our company's performance. Company, as you know, had a very good performance in quarter 2 2020, despite the unprecedented external environment posed by the COVID-19 pandemic. And here, I'd like to really compliment the entire team working in the supply chain, in the plants, and in -- out in the market. It is a Herculean task to ensure that agri inputs, which is so important for the farmer's prosperity, it is like getting drugs to the people. The team worked overnight to get this done. We also adopted and changed the way we work, including digital market, reaching out to the farmers to ensure that this happens. As far as the sector statistic is concerned, phosphatic volumes grew -- was at 19.5 lakh tons, which is a growth in high -- growth of 15 versus last year. Manufactured product sale was 17.2 lakh tons. Last year was 16.4 lakh tons. And imported product sales was 2.3 lakh tons. Here it was only 0.5 lakh tons. We saw a marginal decrease in our market share, 16% from 17% over the period last year. Consumption market share was represent by POS sales was at 18%. Last year, it was at 20%. The share of unique grade stands at 38%. Last year, it was at 35%. SSP market registered a growth of 5% volume with the sales around 3.31 lakh tons. Last year, it was 3.17 lakh tons and quarter 2 has been excellent for SSP, which got hampered in quarter 1 production. For quarter 2, phosphatic volumes were 11.2 lakh tons with the advancement on demand in the first quarter. The business started with very low inventory, resulting in softer sales for manufactured NPK in the second half. Manufactured product sales were at 9.5 lakh tons. Last year, it was 12 lakh tons. If you remember, last year, the season was starting late, especially around August, September. And imported product sales was 1.65 lakh tons as opposed to last year where it was miniscule like 0.18 lakh tons. SSP business registered a 4% sales volume growth for the quarter with a sales volume of 2.02 lakh tons. Last year it was 2.97 lakh tons. During the quarter, the phosphatic fertilizer plant operated at 90% capacity versus 65% in quarter 1 due to the restriction and [Technical Difficulty]
[Operator Instructions] Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you, sir.
Yes. Can you hear me?
Yes, sir, we can hear you. Please go ahead.
Okay. Our apologies for getting dropped off. So I was -- just on this, very quickly, the specialized nutrition and organic business and the retail also had a very strong growth. And business has been collaborating with the farmer producer organization, using companies and agriculture industry to increase its reach and market presence.Coming to Crop Protection. Crop Protection grew by 35% versus probably -- for the first half and 26% for the same quarter. It registered a very strong growth in the domestic market, both in the B2B and the B2C formulation business that, as you know, this good monsoon. And we also scaled up our new product portfolio. The business registered very good growth in the selected export markets, while the bio business registered an impressive growth in the world of global markets. We were further strengthened by new product launches and strategic tie up with the global players, and we launched a selected herbicide lottery and the co-marketing were initiated during the quarter. This will help the company to strengthen its offering in the herbicide category and also balance our overall product portfolio. The B2C business continues to invest in R&D, product development, regulatory filing and has a very rich product pipeline and tend to introduce new molecules in the coming quarters. The product development initiative includes working on 9(3) registration and combination molecules, both for domestic and international markets. The business has initiated center of excellence for new product development, which will help to fast track new product introduction. While the COVID situation is normalizing, business has reinitiated its infrastructure development and its manufacturing plants. Focus on sales and channel excellence, the business has strengthened its planning, deployment, key account management, branding. Like I said, digital connect and farmer advisories in both the domestic and global markets. Our retail stores operated throughout the lockdown with extended hours with all safety precautions and protocols to ensure safe operation and timely supply of agri inputs to farmers. Our stores provided advisory service to farmers through the digital medium with right inputs. We also were able to service the farmers directly, those who cannot come, by getting supplies to their doorsteps.Retail had a good quarter with improved product offering and continuous engagements with the farmers. The company has introduced new delivery mechanisms such as direct delivery to farms and on-demand delivery of products to farmers. This will help farmers to get their product at their choice and at their doorsteps. Coming north, with healthy reservoir conditions, good moisture level, we expect a very good Rabi season. Coromandel will strive to ensure availability and meet their market demand. Our main focus will remain safety of our employee, safe operations, farmer connect initiatives, building brands, digital marketing, operating and supply chain efficiencies. With that, I hand over to Jayashree to take you through the company financials. Over to you, Jayashree?
Thank you, Sameer. Good afternoon all. Let me briefly take you through the company's financials for the second quarter and the first half of financial year 2021. In terms of turnover in the second quarter, company recorded a consolidated total income of INR 4,620 crores against INR 4,867 crores in the last year, with Nutrients and Allied businesses contributing to 86% and the remaining 14% coming from the Crop Protection business. Last year, in Q2, the ratio was 90%-10%. In terms of subsidies and nonsubsidies breakup, Q2 revenue share is 79%-21%. Last year, it was 84%-16%. For the first half, the total income stands at INR 7,843 crores vis-à-vis INR 7,008 crores during the last year. The Nutrients and Allied businesses contributes to 86%, and the remaining 14% comes from the Crop Protection business. In first half last year, Nutrient was 89% and CPC 11%. In terms of subsidy and nonsubsidy breakup, H1 revenue share is 80%-20%. Last year, it was 82%-18%. From a profitability standpoint, overall EBITDA for the quarter is INR 845 crores as against INR 713 crores last year, registering an increase of 19%. In terms of subsidy and nonsubsidy breakup, Q2 EBITDA share was at 74%-26%. Last year, it was 76%-24%. Consolidated net profit after tax for the quarter was INR 589 crores in comparison to INR 504 crores last year for the corresponding quarter. There is an increase of about 17% on a year-on-year basis. During H1, EBITDA is INR 1,260 crores during this year vis-à-vis INR 909 crores during the last year. Overall, this is an increase of about 39%. In terms of subsidy and nonsubsidy breakup, H1 EBITDA share is 76%-24%. Last year, it was 78%-22%. PAT for the first half is INR 840 crores. This is in comparison to INR 566 crores during the last year. Working capital. The company has actually generated healthy working capital and cash flow during the quarter and the first half of the year. Operating cash generation for the quarter as well as the first half has been good. In first half, the number is INR 2,083 crores. Last year, it was INR 1,699 crores. Working capital overall has been managed well, and it improved through the quarter with record collections, and the company maintained optimal inventory level. Inventory during September 20 was INR 2,160 crores vis-à-vis INR 2,533 crores last year. Receivable as of September 20 was INR 1,100 crores vis-à-vis INR 1,993 crores in the previous year. Subsidy outstanding as on 30th September 2020 was high at INR 2,862 crores. It's higher by almost INR 1,000 crores vis-à-vis last year. Subsidy outstanding includes INR 2,100 crores claimed and pending with the Department of Fertilizers. Inventory of stocks, which are pending POS acknowledgment at the retailer's end is close to about INR 500 crores. During the quarter, the subsidy payout from the government was low, and Coromandel has received INR 792 crores towards subsidy. Last year, in Q2, we received INR 1,230 crores. Overall, during the first half of the year, subsidy received from the government has been lower by almost INR 1,000 crores. The government allocation for subsidy has been higher for urea, which had a larger backlog. And even within NPK, the allocation was relatively higher for the imported P&K players. The company has represented the matter with DoF and the regulatory bodies. As far as the interest costs are concerned, it has trended really well during this year. The company had a mix of borrowings, like bank loans, seller credits, commercial paper, et cetera. Bank borrowing during end of September was about 1,000 -- was about INR 145 crores. The balance sheet continues to remain strong, with the debt equity ratio at 0.03, end of September 2020. Company continues to maintain its deposits, which is are earmarked for specific growth-related investments. Interest cost for the quarter was at INR 17 crores, if you -- excluding the Ind AS 116 related interest. This is down from INR 55 crores last year. Interest cost for the first half was at INR 51 crores, which is down from INR 129 crores during last year. The savings in interest cost is attributable to better business performance, working capital management and lower borrowing costs. As far as the product is concerned, during the quarter, we saw rupee trading in a range of INR 72.76 to $1 to INR 75.51 to $1. While it started on a low note, during the quarter, it strengthened and closed around INR 72.76. Coromandel effectively managed its exposure in line with the hedging strategy. Overall, it has been a good quarter and a good first half. We thank you once again for joining us and your continued interest in Coromandel. With this, we can open the session for question and answers.
[Operator Instructions] The first question is from the line of Sumant Kumar from Motilal Oswal.
So my question is relating to the cash overall. The company is now a cash surplus. So how the company is going to utilize their surplus cash going forward? What are the -- our CapEx plan and inorganic growth plan?
Sumant, thanks for the question. As you see, the company over the last couple of years has been generating cash positively. As I was mentioning about the business performance, and more importantly, it's due to the working capital management, which has been very tightly and nicely handled. Last year beginning, we had very high inventory. And with the increased demand and adequate planning, inventory has been optimized. Similarly a lot of focus has gone in terms of collecting our receivables, which is also augurs well from a working capital standpoint. However, subsidy receivables from the government continue to be a concern. So with raw material prices slightly inching up, the inventory levels will sort of get a little bit moderated. Having said that, the company intends to carry out its activities in terms of putting up additional infrastructure. We have shared the CapEx plan for the year. It was about INR 450 crores to INR 500 crores. Part of it has got deferred primarily because of COVID-related concerns that we had during the initial part of the year. We also have plans in terms of debottlenecking our Kakinada and Vizag, that's being taken up now. So in the next 2 to 3 years, we expect CapEx of about, on an average, INR 400 crores to INR 500 crores. As you know, all our CapEx expenditure, including the PAP plant that was put up in Vizag, was funded out of our own funds. So that's number one. The second thing, like we alluded in the past, Coromandel would be open for any interesting inorganic opportunities, provided it is synergistic with our business model and also comes with the right price. So those are strategic initiatives. We have drawn a 5-year long-term plan with clear indications in terms of which are going to be our businesses that will accelerate in growth, and we'll focus on that. And we do believe the cash generation that the company is having will definitely aid us in our long-term growth plans.
And with the Mancozeb, particularly is under pressure and post ban in Europe, so what is our plan for manufacturing other molecules for export markets?
Again, a good question, Sumant. When we spoke about the Crop Protection business earlier on, and we continue to do that, the focus is to see how we derisk our main molecule, which is Mancozeb. Currently, Coromandel does not have exports into Europe. Therefore, the ban in Europe is not going to impact Mancozeb sales per se. Mancozeb is a broad spectrum fungicide, which is our resistance breaker. And at the cost at which it is being sold, currently, there are no other molecules. So we do not see a big threat in terms of sales of Mancozeb per se. Having said that, continuously the business has been looking into getting new generation molecules, into its manufacturing and sales. So as part of, again, our long-term strategic plan, we've identified close to 30, 35 molecules, which have recently gone off-patent or is likely to get off-patent. The business is looking into a buy or a make depending on the synergies that can come in. And therefore, even our plants at Gujarat are looking at setting up -- even our facilities at Gujarat, we are looking at setting up multipurpose plants, which can aid manufacturing of these new generation molecules. As far as the local domestic sales is concerned, I'm really glad to announce that over the last couple of years, the effort that has gone into research and development, regulatory trials, product development is yielding rich dividends. We are seeing an increase in terms of the percentage of revenue that is coming from our new products. And during the first half, the domestic revenue, almost 26%, has come from our new products that were introduced in the last couple of years. So clearly, there is a focus on introducing newer molecules, identified molecules are there, R&D work is being carried out. More importantly, there is focus on bringing in combination molecules as well. Over and above all of these, we are also closely working with some of the Japanese innovators to get 9(3) molecules, which could be specifically for India's requirement.
[Operator Instructions] The next question is from the line of Sanjaya Satapathy from Ampersand.
Sir, I don't know whether you have already covered this. I just wanted to know why your manufactured fertilizers volume declined so much during this quarter and you lost market share?
Okay. Thanks, Sanjaya, for your questions. As we mentioned during the initial briefing, the first 1, 1.5 months, as we started our year due to COVID, we had to go little slow in our manufacturing, especially in our Vizag plant, Kakinada was fully up and running. Having said that, this year, the season started much earlier, plus there was a demand from the dealers as well as the farmers because there's a lot uncertainty due to COVID situation. So the first quarter of the year saw a huge demand. And to that extent, some of the sales, which typically happened in the second quarter had moved into the first quarter. That's number one. And we also started with a low inventory as we moved into the second quarter of the year. It sort of complement very carefully Coromandel chose to import certain generic grade, mostly DAP, but also some amount of NPK so that we can continue to serve the markets. As we move into the third and the fourth quarter and the situation relating to COVID normalizes, we would be in a position to continue our manufacturing. As I was mentioning, in the second quarter, the manufacturing capacity was almost at 90%, which is in contrast to almost 65% in Q1. So that's the main reason, if you look into it.
If I can ask, even October month, we realize that the volume also declined. So when will we start seeing growth from Coromandel in terms of volume?
Sorry. I'm not sure where you are seeing volume decline. Overall, volumes went up by 15%, and the consumption volume actually went up by 30%. Just that the market also increased their volumes, particularly related with imports of DAP. Some of the impact you will actually see in the second half of the year, yes, for the industry.
Understood. And hopefully, second half will be back to growth?
No, no. We have had a very good growth in the first half. Second half will continue to do well. Obviously, for us, the first thing is the safety of our plant, equipment and people. That's the number one thing. So that's one. And we have also have imports, shipments lined up in terms of meeting some of the excess demand, which will come.
The next question is from the line of Nitin Shakdher from Green Capital Single-family Office.
My question is in regard to the operational cash flow. I couldn't get that figure properly. What was the operational cash flow after working capital, but before the CapEx?
Just a minute, I'll give you that. So the operating cash flow for 31st -- 30th September, before working capital changes is about INR 1,194 crores, yes? And after considering the working capital changes, it comes to INR 2,260 crores.
Okay. This is in comparison to, I think, around INR 2,230 crores earlier before, right, approximately?
Yes. The comparison last year for cash generated from operations was INR 1,866 crores.
The next question is from the line of Bharat Sheth from Quest Investment Advisors.
Congratulations, Sameer and Jayashree, on excellent performance. Sameer, I mean, just to understand from -- I mean demand meeting from our own manufactured product since what we understand Kaleshwaram project is headed, so the cropping has also gone up, I mean, showing in this first half, around 25%. Whereas we are also running a low inventory vis-à-vis earlier year. So how do we really, to cope up, I mean, manufacturing product, I mean, to meet the real demand, which is there on the ground?
Right. Bharat, there are a couple of things here, you're saying. Firstly, let's talk about what's happening in AP/TG. Good thing is there's a lot of changes. Firstly, irrigation has done well. This time, the rains also was positive. And especially thanks to the Telangana government on the desilting of canals and the tanks. The water retention also has been good. Although this time, it broke all boundaries. Like you saw, Hyderabad was also under water. So that is something which is to be done. And Kaleshwaram project will get new areas under irrigation. The other thing which the government and the farmers are trying to promote is also to look at other crops other than the traditional paddy and cotton. So they are promoting other seeds. Especially on the oilseed front and also on fruits and vegetables, which has a different pattern and also the income of the farmers will increase. And this is where our specialized fertilizers and also our bio -- and organic also is coming up, although in a small way currently. This is where our specialized fertilizers, crop protection and oil business is growing very fast because, obviously, fruits and vegetables do require as either drip irrigation or they require foliar spray. So that's how we are meeting the demand, including our organic business, which is growing along this.Now coming specifically to your point, the first good thing is because of the demand of our products. Like I said, primary sale has increased by 14%, but the consumption has been as high as 30%, which shows the type of throughput, and very happy to see that we are actually holding lower inventory. I'm still not happy with the inventories because we need to get into a model of basically talking about just in time instead of holding inventories and such. So that is one part of it. Now coming -- as far as our manufacturing is concerned, we do focus on NPKs and not on the generic DAP. So we were able to increase our sales of NPK grade and also resorted to some imports on the DAP side, although Godavari DAP is a very strong brand. But there's a lot of generic competition there. And our focus has always been on unique grades and also what is called premium grades, which we specialize. Same will apply for single super phosphates. So our focus has always been on quality than on the quantity, on selling it. The other thing is that we are also debottling our plants, increasing the capacity in those plants. And that's why despite COVID, in the quarter 2 of the year, we are able to operate at a 90% capacity as opposed to 86% last year. So that is something which is credit to the plant team despite all the issues around COVID. What had happened was last year was a good Rabi season. So our inventories were relatively lower, which is also what it was planned. But this year, when the COVID lockdown happened, the government while it made it as essential services, you are careful especially when you operated our plants, which are closer to the city centers, which are Vizag and Ennore. As Jayashree said, we continued with some restrictions to import Kakinada as a plant because we didn't want COVID to spread in the plant. And that way -- and that has its own other implication. In that way, our plant team has done very well in terms of ensuring that not only we don't have incidents of COVID within the plants. And whoever had it, we have been able to isolate them and cure them. But in Kakinada, for instance, being a tertiary 3 or 4 town, the medical facilities were not there, and we ended up not only in the government hospitals creating full isolation ward and also creating a ward, which had all the ICUs, which operated. And it is not about Coromandel . It's about people in the town. Almost 165 critically ill patients have got cured. And same as we have done across all our plants. We hope until the vaccine is found, we can -- we'll be able to do this. So for us, safety of people and plant is more important than other things. And like Jayashree said, some of the capital items, we have not started as the things are much more under control, and we are now upgrading our plants.
[Operator Instructions] The next question is from the line of Janakiraman from Franklin Templeton.
Two questions. One is, there has been some statements from the establishment about excessive use of fertilizer in AP, Telangana. And recently, I think 1 Telangana minister has also gone on record indicating something similar to this. What is the true picture in terms of per acre fertilizer consumption and the NPK ratios, things like that in your key districts in AP/TG?
Right. So it's a good question, again. Like you know, the issue on fertilizer is more on excessive use of N, which is basically got to do with the subsidy of urea. In fact, the agriculture minister of Telangana, when urea was in short supply and we do import urea, was requesting me about using urea. We were actually telling him, "Look, you need to educate the farmers," instead of using urea, can use our grade fertilizer, which is 28%-28%, which only not only meets the requirement of -- you see urea is 46%. We have a fertilizer, which is called -- it's 28%-28%, which has 28% of N, but it also provides 28% of P. And then I gave some scientific evidence, why if we even use the same paddy, the yield for the farmers is a lot better when you use NPK grade than to use just sole urea. So the problem is basically the urea. And that's where the issues are. And the second thing, as a company, what we are promoting is aggressively for the farmers is basically organic fertilizer because, again, a lot of the soils have got depleted because of the -- not having enough of carbon content. So when we promote organic, it actually helps to the soil regeneration to happen, and also to get the balance so that the fertilizer nutrition is then increase. So that is something which we do with our -- both on increased levels, which is at a dealer level and with the retail outlets. We actually go and do soil samples at the farmers fields, and then advise him on what sort of balance nutrition to be used so that there is no excessive use of any of the fertilizer. More importantly, it also shows it's not about NPKs, like protein and carbohydrates what we have. It is also good to have minerals and vitamins. And therefore, we advise them on the secondary nutrients, which maybe deficit or the micronutrients, which will be required. And some of our unique grades have those fertilizers so that they can have the same.
Right. Right. And maybe the other question was that you mentioned that you had a 15% primary growth and consumption growth was 30%. Can you explain this in the sense, I thought...
So primary growth is what we invoiced to our dealers. But now with the DBT machine, you can also -- you also know what is actually consumed by the farmers. And that's why inventory in the trade channel is at a all-time low, which is good. It just shows that we are selling in the right consumption area through the right type of farmers. And that growth has been 30%.
The next question is from the line of Ankur Periwal from Axis Capital.
Congrats on the good set of numbers. So 2 questions from my side. One on the fertilizer front. You did mention debottlenecking happening in parallel, which is also sort of help us to increase the manufactured volumes given the new inventory that we are setting in. Would it be fair to say that the current -- broadly seeking, the current monthly production run rate will continue for the next, let's say, quarter and 2, so that we can have ample inventory as well?
Yes. Ankur, as we were mentioning, the COVID situation being in control and the safety of the plants they have paramount importance. If things go well, like in Q2, we would like to maximize our production. We will also be taking our annual turnaround during the end of this year because we had to sort of skip it last year because of COVID coming and setting in. It is important that all our large plants go through their annual turnaround and maintenance. Depending upon the size and complexity, it could vary between 2 to 4 weeks, and that is also planned part of the current year operation. Our debottlenecking at both Kakinada and Vizag have the ability to release capacity of about 150,000 metric tons, for which we have already initiated actions and CapEx has been approved, and work has been initiated at the plant.
Sure. And on the margin front as well, how should one look at it? Because this quarter, obviously, the margin performance has been much stronger. So any thoughts over there?
Yes, I think that's again a good question. As you see, typically in fertilizer industry, Kharif is a big season. And our margin guidance has always been on a full year basis rather than looking at on a quarterly basis. Q2, typically, the margins will be attractive because you also get a lot of leverage in terms of operating efficiencies. We would see, in the past as we have gone ahead with our backward integration, our PAP-2 plant has been fully operational. The benefits in terms of value that has also started accruing. So we do maintain that our EBITDA margin per metric ton should be INR 4,000 plus as we go along. And our endeavor would be, obviously, to see how we can maximize it.
Sure. And ma'am, just one clarification. In your one of the earlier comments you mentioned newer products on the crop protection side, newer products contribution at 26%. So if I got this right is a revenue contribution coming from the newer product or out of the 35% growth in H1 and 26% growth is from newer products?
Now, this is overall. If I were to look into the crop protection revenue, 26% of the revenue is coming from these products that have been newly introduced. Obviously, the newly introduced products would also have better margin profile. Even some of those are our own manufacturing, like Astra, which is pymetrozine or Prospell, which is a combination molecule. Just a couple of examples out there.
Sure. Ma'am, will you have the same number for last year as well? That's the last one from my side.
From a percentage standpoint, I think it was maybe around 10%, I can come back with specifics, Ankur. But there's a conscious effort and that's why we're seeing the NPI volumes as well as the revenue picking up. This is the first year of finances being introduction for us. So you would see that there is an uptick in the current year.
[Operator Instructions] The next question is from the line of Deepak Chitroda from PhilipCapital.
Congratulations on a good set of numbers. Ma'am, I just have 2 questions. The first part has been already answered. Especially -- now on the second part about the volumes for the second half, what is your expectation now because we have already seen a higher base of last year because we had a very good Rabi season last year. So do you think that probably we'll have probably around high single-digit growth in the H2?
See, our endeavor is to see how we maximize our volume. As I was mentioning, we are looking into not just on manufactured product, but also selectively importing. So both these actions are being taken. Apart from fertilizers, this year there is a lot of trust that's happening in the other SBUs, though fertilizer is still the largest for us. Crop Protection has seen a very good growth. The Bio business especially have seen a tremendous growth in the global market. Retail has been doing extremely well. Demand for percentage of sales is what we measure for retail because that's a very important parameter for us to see that the stores are profitable, which is primarily Specialty Nutrients as well as Crop Protection. We are seeing a big jump over there. So overall, if you look at it, well, there will be growth. Intent is to maximize, we are selectively importing both DAP as well as some very basic generic grades that the market might require.
Okay. Okay. And ma'am, just to add on that, to the previous participant question. If you talk about -- ma'am, what has been the major contribution with the improvement in the margin? I mean in terms of -- I understand that the major contribution with the improvement margin was on the complex fertilizer side. But if you can talk about in terms of particular grade, I understand probably the larger contributor could be the unique grade products.
See, unique grades, obviously, offer us good margin. But with the total backward integration of facility at Vizag. It's not just a unique grade because the value gap gets translated into all the products that are manufactured where our plants are fully integrated. Same is the case Ennore. So some of the grades that we -- maximum are manufactured in these facilities, though they may be generic in nature, currently contributes to a high-margin percentage. You should also understand, with our backward integration fully complete in Vizag, there is also opportunity for us to transport phos acid into our Kakinada plant. All these plants are both unique and generic grade. So wherever we are able to use these assets, you feel a margin uptick. definitely happy.
[Operator Instructions] The next question is from the line of Abhijit Akella from IIFL.
Ma'am, just regarding the phosphoric acid prices that you spoke about for 3Q, it's been increased from $625 a ton to $689. Just to check whether the domestic -- the industry is considering taking any MRP increases for the Rabi season? Or will we have to kind of absorb this increase?
Selectively, there will definitely be increases, Abhijit. We've seen that happening in the past. Already, the DAP prices have gone up. Having said that some players had announced DAP price increase and then there is farming community, which is "oh, the prices have gone up." But on select grades, you would see that the industry will come up with a price increase. From our standpoint, what we had done earlier on is, with the benefits coming in from some of our backward integration, we've gone ahead and announced a reduction in price so that, that also helps in some of our generic grades, which can be pushed to the newer market.
Okay. So just to follow up...
We also anticipated -- Abhijit, we had also anticipated increases because you could see how the international market is playing out given the COVID situation. So we had bought diesel upfront to cover on low priced materials.
Right. Just to follow up on that. So by when will the prices be increased, ma'am? And by -- how much of an increase can we expect for DAP?
Currently the industry is holding on to the prices. For us, we do get the benefit of our own phos acid manufacturing. So to some extent, we aren't as much impacted. I -- my gut feel is probably another month or so, you would see some increases coming in on the DAP, just before the Rabi season gets started.
You've seen some of the importers having burnt their fingers because, obviously, they were taking the opportunity sales into account. And if they have loaded the trade, then they'll have a problem.
Right. Got it. And my second question was just with regard to the Vizag wage settlement, which has just happened. So if you could point through any kind of cost increase we should expect in the wage business going forward?
Nothing substantial. This has been in line with delayed settlements in the past. It's gone up quite well.
And just on that, Abhijit, again, what we have with all our workforce is a profitability and then bonus. And all our teams are working very good together. So the workers don't get just on normal listing. They have a productivity-linked bonus. This includes a lot of parameters, including, efficiency, safety and all. And that is really helping all our plants in terms of workers participation in all our initiatives.
Ladies and gentlemen, we will take the last question from the line of Tejas Sheth from Nippon AMC.
Ma'am, 2 questions. One, on the Crop Protection side, how we see a 3 to 4-year perspective? You mentioned that you're looking at a lot of molecules, but how you see that ramp up coming up?
Okay. Crop Protection is one of our growth engines as we identified it in our long-term initiative plan. Towards that, there are multiple levers that have been used. One obviously is our manufacturing looking into newer molecules, which are relatively new from a patent standpoint, which is just come off the patent -- are coming off the patent in the next few years. So that's just one aspect of it. The second thing is also to see how you can participate more effectively in select markets on a full B2C or a B2C light. The third one is to continuously work on several product development initiatives, that's where collaboration with innovators come in handy. Then is obviously working on combination because that also helps break the resistance in some of the molecules. So multipronged approach is being taken. We are strengthening the teams in all these areas, be it sales and channels, domestic, global partnership for new product innovations and introductions, improving our infrastructure and manufacturing capabilities as well as looking into centers of excellence in terms of supply chain, manufacturing, where you can get a lot more efficiencies. So overall, if I were to look into a 3- to a 5-year horizon, I would think that Crop Protection business would be in a very, very good spot.
Okay. And just on the subsidy part...
Just to add to that, sorry -- can I to add to that? We are quite unique in the way we have 4 places to place upon. One is, of course, our international markets. And within that, we also have Bio, and that is growing very fast with the higher market but we able to sell it to the grade markets. There also we are researching a lot of things, including what is called application in terms of being given precise and concise pesticides. And therefore, we are unique in terms of having a integrated test management system. At the same time, we are -- we've got 4 places, which as I said, international. The second one is domestic B2B. The third one is -- and there, again, we have what is called our branded B2B. So our pymetrozine, which we are seeling we are actually branding it and then giving it to other companies. And the third one is in terms of our domestic B2B, B2C, which is our formulation business. And lastly, we are unique in the sense we have our retail outlets, which are also reaching out and there the priority is to sell, again, Crop Protection and other what's called specialized nutritions. So that is really -- in terms of -- and that's going to be our pronged strategy. And therefore, we are now finding a lot of attraction of even co-marketing coming in. We are strengthening our teams function to ensure that we deliver this faster growth to market. The next question?
On the subsidies, you mentioned that the government is very, very slow for providing subsidies to the complex manufacturers. How you see that ending up for this financial year? We see that it will be kind of depth.
So there are 2 things here. One is, of course, the government had the certain budget for subsidy for last year, which was actually lower than the previous year budget. Thinking that at least from urea, they -- because of the biggest measures they have taken, the consumption will actually come down. And some participation was mentioning about their excessive use of urea cost for market. But that, given the monsoon situation and other things, that has not happened. And therefore, the backlogs impact has got bigger on the urea fronts. And they are suffering heavily. So they -- the government actually decided to allocate some of the backlog to the urea subsidy. As far as NPK is concerned, we have represented to the government showing the -- normally that they need to pay NPK manufacturers as compared to importers, and they have agreed on that. The good thing is, as far as -- given the fact fertilizer has been now put into A category, instead of B category, because it became a growth industry for the economy, there's a meeting on the 9th of November, which we are hoping that the Finance Ministry will allocate more money to the fertilizer industry so that it can help in terms of investments. Because, obviously, a lot of companies, not us, are suffering because of not having enough subsidy with the working capital having an issue for them. We do hope if this does not happen, this time, the government does, what is called the, banking system earlier, where if they get the loan for all the subsidy, which is due to them. And like it happened 2 years ago, they do it early -- in the early half of the -- quarter of the year, that will be better. So that the year-end, most of the subsidy, which have already been processed is given to the company as a bank tool.
Ladies and gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to Mr. Manish Mahawar for closing comments.
Thank you for that. On behalf of Antique Stockbroking, I would like to thank the team of Coromandel International for providing us an opportunity to host the call. Mr. Goel, would you like to make any closing comments, sir?
No, I think, like I said, that the beginning it's -- we're very happy to see how agriculture has supported the Indian economy and how the rural demand is actually supporting again the Indian economy in these difficult times. What has also happened is that it has shown the true potential of agriculture. Internet penetration now in the rural area is better than the urban areas. And therefore, in the [indiscernible] the government also has pumped in a lot of money in the rural areas, which is also helping in terms of the economy. And Coromandel is, obviously, as the largest agri input player is well poised to continue to take these trends. What we didn't talk about in this conference is despite the fact people were working from home, we were able to reach out directly to the farmers by digital marketing, using other means of delivery into their home so that we make sure that they have the right inputs for the crops. And we are very happy to see how farmers approach to that situation and adopting new technology. We do continue to feel that this adoption of technology is very good. What is called our company joint venture, [indiscernible] which is basically to combine harvesters and what is called RTE equipment for sales conferences. I have already sold the full year requirement in less than a day, which also -- in 6 months time, which also shows the fact that farmers are willing to adopt new technology for improving their business. So overall, we're quite happy. Rabi is expected to be on similar lines as you watch how the Northeast monsoon comes. But the good thing is the reservoirs in the southern part of the country are quite full, and the soil moisture level is also good. So we will continue to update and continue to get good superior products to the farmers. Thank you very much, and thanks for the call.
Ladies and gentlemen, on behalf of Antique Stockbroking Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.