Coromandel International Ltd
NSE:COROMANDEL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 039.5
1 806.45
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Coromandel International Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Coromandel International Limited Q4 FY '18 Earnings Conference Call hosted by Edelweiss Securities Limited. [Operator Instructions.] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohan Gupta from Edelweiss Securities. Thank you, and over to you, sir.
Thanks, [ Ayel ]. Good afternoon, ladies and gentlemen. On behalf of Edelweiss, I welcome all the participants logged in for the conference call of Coromandel International. From the management, we have Mr. Sameer Goel, MD of the company, and Ms. Jayashree Satagopan, who have just recently joined Coromandel as an EVP and CFO of the company. Good afternoon, Mr. Goel, and good afternoon, ma'am.
Good afternoon.
Good afternoon.
So first of all, thank you very much for giving us the opportunity for hosting this con-call. As always, [first to you], if you can just give us a brief about the quarterly results, some industry scenario, and how the industry changes are going to pan out, going forward, and then we can follow it up with a Q&A session, ma'am. Thank you very much. Over to you.
Yes. Good afternoon, everyone, and thanks, Rohan, for [indiscernible] this conference call. I'll first give an overview of the business environment experience during the year, followed by the company's performance. Jayashree will take you through the financials, and then we can take the Q&A.So during the year, especially during what is called the Rabi season, the South experienced rainfall deficient of 11%, as the Northeast monsoon [ had a failure ]. A few states like Telangana [indiscernible] see [indiscernible] rain, but it was highly erratic.On an all-India basis, aggregate sowing across the 2 seasons have been marginally lower, at 1%, while the full grain output is expected to increase by 1% to record 277 million tonnes. One good news is horticulture segment has also done well, and its output is expected to be 305 million tonnes, up by 1.3% over '16-'17. The data which we have for all-India's sowing in lakhs of hectares for both Kharif and Rabi, we have seen a decline by minus 4%, it's 299 lakhs hectares. Rice has seen a marginal increase at 401 lakhs hectares. Pulses have seen an increase at 305 lakhs hectares, 1% increase. Coarse grain, which did well last year, has been a decline of minus 2% at 242 lakh hectares. Oilseeds did see a major drop at 252 lakh hectares, a minus 8% drop. Sugar cane has seen an increase of 9%, and cotton has actually seen a dramatic increase of 19%. All in all, the [oil and gas] sowing for the full year has been more or less at the last [ sales ] level, with a marginal decline of minus 0.5%.When we look at the all-India production for the full year, wheat has seen a minus 1% decline at 97 million tonnes. Rice has seen, again, an increase of 1%. Pulses have gone up by 4% at 24 million tonnes, and coarse grain actually has increased to 45 million tonnes at 4%. So overall, food grain is expected to be 277 million tonnes, which [have an] increase of 1%. Oilseeds have seen a decrease to 30 million tonnes, which is a decrease of minus 4%. Cotton has gone up by 4%. It's at 34 million tonnes. And sugar cane, again, has seen an increase of 3% at 353 million tonnes.Centrals [indiscernible] offices project agriculture and [indiscernible] service to grow by 3% on a [indiscernible] basis for '17-'18. It was 6.3% last year, driven by good [ full game ] output and improved livestock performance. On the education front, all-India [indiscernible] have been down by 24% of the total storage capacity. Last year, it was -- at the same period was 29% last year. South has been quite bleak. Currently, it is at 15%, while last year also it was down at 11%. On the positive side, the weather forecasting agencies, both IMD and Skymet, have estimated normal monsoons for 2018 at 97% of long period average by IMD and 100% by Skymet, which bodes well for the ensuring Khalif season. Region-wide estimates point out toward straight-out monsoons, with Central region likely to receive above-normal rains, and normal rains in South and Northwest parts of India.Bolstered by this announcement to provide 1.5 times the cost of production of a crop, Coromandel is evaluating various options to support the agriculture prices. This includes market assurance schemes. Also, the second option is to have price deficiency procurement scheme. And third option is to relate to private procurement and stock of seeds, which relates to procurement by private contract [indiscernible] MSP and government providing some policy and tax incentive and [ add permission ] to such private entities, which may be decided on the basis of transparent criteria and bidding of [ empowerment ] of private players by the state government.In our markets, government of Telangana has allocated INR 12,000 crores for a scheme what they call Rythu Bandhu, which is farmers [ strength ] scheme in the budget for 2018-'19, which seeks to provide a grant of INR 8,000 an acre for the farmers toward investment support. As per this plan, 58 lakh checks will be distributed in a week to cover the 8.25 lakh checks a day in the May month. This is actually closest to what is called [ added benefit ] [indiscernible] to the farmer.On the subsidy side, India's rates for '18-'19 have been announced. As per the notification, [ B. and S. ] rates are up by 27% and 22% respectively, with [ N. ] at almost last year level, and [ TA ] declining by 10%. At these rates, subsidy of the AP has moved up by 16% to INR 10,004 per metric tonne. Decrease of [indiscernible] are in line with the increase of phos acid prices, depreciating rupee, and prevailing international DAP prices.During March, the government also released special banking arrangement up to INR 7,000 crores from nationalized banks to meet fertilizer claims from September 2017 to February 2018 for the NPK players. Under this, the rate of interest borne by the government is 6.84% per annum on actual rate of borrowing basis by fertilizer company, which is lower. Under SBA, government will receive INR 617 crores during March month. The Direct Benefit Transfer has been rolled out across India [ in a fair manner ] between October '17 to March '18. Now all the states in India have been covered. Though the initial challenge with respect to technology, [indiscernible] [ recording ], and point-of-sale machine installed have delayed the implementation, there have been some stabilization since. However, we still have to wait for the results of this in the Khalif season. Going forward, we expect the industry sales to [ realign ] to consumption from 2018 onwards. Coromandel has also transited into DBT regime with effectively [ concerning ] the majority of opening stocks and pending stock acknowledgement across the states. In the changing business scenario under DBT, Coromandel has moved closer to the customer by [ extending ] its [ field in ] presence and deploying technology tools for effective communication with the channels partners.Coming now to the industry side, for [indiscernible] industry slowed down its sales during the quarter as it aligned the sales towards DBT. All the three segments, urea, phospatic, and MOP, resisted sales decline. For quarter 4, sales volumes were down by 11% to 37 lakh tonnes. However, for the year, the industry sales were up by 3% to 175 lakh tonnes from 171 lakh tonnes a year ago. Overall industry liquidation profile has improved slightly, and [ channel ] [indiscernible] increase are much lower compared to the beginning of the year last year. As of March-end, phosphatic stocks with the states are less by nine lakh tonnes versus 10 lakh tonnes in March 2017.During the year, industry operated at 83% capacity, up from 79% last year. Ample asset availabilities resulted in higher production, partly [indiscernible] the imports, which were down by 4% to 47 lakh tonnes. If you look at the full year, for phosphatic, the production went up to 129 lakh metric tonnes, up by 5%. [ Imports ] actually went down by 4% to 47 lakh metric tonnes, and sales were up by 175 lakh metric tonnes, up by 3%. In case of urea, the production was down to 214 metric tonnes, a decline of minus 1%. Imports were up to 16 lakh metric tonnes, up by 9%. And overall sales also grew by 2% to 303 lakhs metric tonnes. Phos acid prices for quarter 1 FY '19 have been finalized at USD 730 metric tonnes, which is up from USD 678 levels in quarter 4. [indiscernible] [ government ] have increased the [ India's ] rates of P nutrients by 27%. Industrials is subject to price increase, and on an average DAP prices for the industries were up in the range of INR 2,000 to 2,500 metric tonnes, equating to INR 100 to 125 [indiscernible]. Ammonia and sulphur prices have been showing a softening trend during the quarter. Turning now to Coromandel fertilizer performance. Overall plants operated at 83% capacity, up from 70% a year back, in line with our Make in India strategy, manufacturing 28.7 lakh tonnes of phosphatic fertilizers. Plants' annual maintenance shutdown was advanced to March, and, hence, they operated at a lower 70% capacity utilization during quarter 4. Phos acid availability remains comfortable during the quarter and the year. We increased our captive acid production by 19% and improved flexibility by operating through new acid and rock sources. Further, our joint venture partner [indiscernible] are beginning to stabilize, and during quarter 4, plant operated at the planned level. Our phosphatic acid expansion plan project in [indiscernible] is well on track, and is likely to be completed in quarter 2 of FY '19 as per schedule.So if you look at Coromandel on the full year, our plants operated total [indiscernible] capacity increase from 28.67 lakh metric tonnes, up from 24.13 lakhs metric tonnes, a growth of 19%. And our phosphatic acid production also increased by 19% during the same period.On the sales side, our phosphatic volumes are been up by 4% during quarter 4 to around 6 lakh tonnes compared to the industry decline of 3%. Cumulatively for the years, volumes are up by 11% to 27.67 lakh tonnes, resulting in improved market share of 15.8%, up from 14.6% a year ago. During the year, we imported only one DAP shipment, contributing to 42,000 tonnes of sale. Overall, liquidation is up during the year, and that has resulted in improved market collections and lower channel inventory. We moderated our sales in quarter 4, in line with availability liquidating opportunities and the needs for DBT. The good news is that [indiscernible] continues to do well, and during the quarter, its volume were up by 24%, with a grade share of 41%, up by 7% from 34% last year. Cumulatively, unique grades volumes have improved by 27%, with a grade share of 38%, which was 33% last year. On the graded fertilizer, MOP and urea sales are more or less at last year's level. During the year, MOP sales stood at 1.7 lakh tonnes versus 1.8 lakh tonnes of full year 2017. We had some issues regarding consultation and availability from the mines on MOP. Urea volumes are marginally up by 2% at 9.4 lakh tonnes.On the competition side, during 2017, global crop protection market was weak, and the [ rail ] growth is estimated to decline by 3% of the inflation and foreign currency impacts [ are removed ]. Crop prices remained lower, adversely affecting farmers' income, and product inventories in some markets, notably [indiscernible], remained high. On the regulatory side, industry continues to experience increased scrutiny. Sector regulation driven by growing environmental concern advance of science and increasing regulatory capability [ in excess ] of data. For the sector, environment enforcement in China led to closures of technical facilities, and, consequently, lower availability, resulting in rise of cost of production. Coromandel crop protection business has had a good year on turnover basis in both domestic and export market, resisting a growth of 8% to INR 1,506 crores by scaling up in new markets. However, falling prices of key molecules and non-availability, and increase of cost of raw materials affected margins and impacted business profitability. During the year, business received 73 new registration in key geographies and in addition to opening up a subsidy in Nigeria, and also we are -- applied one in [ Mali ]. Further, 4 new formulations were introduced in the domestic market.On the manufacturing front, [indiscernible] operation at the edge [ were for ] [indiscernible]. We are further augmenting [indiscernible] capacity at [ the edge ] during '18-'19, which is likely to come in [ scheme ] by end of quarter 4 to full year '19. During the quarter, we received shareholders of [indiscernible] while acquiring our bio-pesticide business, which has been effective from first [indiscernible] 2018 and provides us an [indiscernible] as management portfolio expanding into bio-stimulants and micro [indiscernible] space. This will enable the company to gain entry into high-growth bio-pesticide segment in the developed markets of America and Europe.The retail business had a very good performance during the year, backed by good rains in Andhra, [indiscernible], and parts of Karnataka, employing its scale and customer connect initiatives. [indiscernible] driven by strong performance in the non-fertilizer segment, focused product, and store [ of goods ], and executing the demand -- with demand-generating enablers. [ Business ] expanded its coverage in Western [ Maharashtra ], and currently it has opened eight new stores during the year. [indiscernible] successfully partnered with [ Dahandra ] [indiscernible] in opening up 5 custom [indiscernible] centers in East and West [indiscernible] farm mechanization.Specialty nutrition business showed a very good growth in numbers during the year. Business introduced 2 new products, which have received positive feedback from the market, but this [indiscernible] has extended its crop-based approach to paddy, potato, pulses, and other horticulture crops. During the year, single super phosphate industry continues to operate at lower capacity with as high channel inventory and weakened monsoons in the West and Central India impacted the consumption. Overall industrial volumes are down by 3%. However, [indiscernible] sales are up by 9% to 5.2 lakhs tonnes, making it the largest marketer in India, improving its market share to 13% from 11% last year. Further, with their significant change in SSP policy regarding mandating marketing to print -- marketers to print the name of manufacturers on the bags with eligibility of subsidy for SSP unit, we expect [indiscernible] to benefit out of it.Our organic business volumes are up by 9% to 1.4 lakh tonnes. In the city compost segment, we continue to be the market leaders, with a market share of 18%. During the year, business has commenced bio-mining operations of city compost at [indiscernible]. So hence, overall, it has been a very good year for the company, where business has shown all-around improvement in performance with increased sales and liquidation, and operating at a higher capacity utilization, resulting in improved operational efficiencies. With the full cost of normal monsoons in 2018 and the government focusing on improving farm [realization], we expect the agrarian economy to continue to grow this year. We are on track with our long-term strategic objectives.And now I hand over to Jayashree to read the financials.
Thank you, Sameer, and good afternoon, everyone. In terms of turnover for the company, in Q4 fiscal year '17-'18, the company recorded a consolidated turnover of INR 2,371 crores, growing by 4%, with new [indiscernible] businesses contributing to 87% share. The remaining 13% coming from the crop protection business. Comparative numbers for last year, nutrients, 87%; CPC, 13%. For the full year period, the consolidated turnover is INR 10,990 crores. As [ again, the last year's number ] [indiscernible] 10,195 crores, showing a year-on-year growth of 8%. Current year, nutrients is 86% and CPC, 14%, same percentages in the last year. In terms of subsidy-non-subsidy breakup, Q4 revenue share is around 80-20. Last year was 80'20 as well. For the full year, revenue share from subsidy business remains at 78%, same as last year.In terms of EBITDA, overall EBITDA for the quarter is INR 169 crores against INR 272 crores of last year. The reduced profitability in Q4 can be attributed to increase in raw material prices in fertilizer and crop protection, some amount of repeated [indiscernible] and one-time cost increase relating to [indiscernible].Cumulatively for the 12-month period, EBITDA stands at INR 1,226 crores vis a vis 982 crores last year, up by 25% year-on-year. In terms of subsidy-non-subsidy breakup, Q4 EBITDA's share was 70-30. Last year, the ratio was 74-26. Cumulatively, EBITDA share from subsidy business stands at 68% vis a vis last year at 62%. Consolidated PBIT for the quarter ended 31 March, 2018 is INR 146 crores as against INR 247 crores last year. PBIT share before unallocable expenses from nutrients and [ allied ] business was 84%, while the share of crop protection [indiscernible] 16%. For full year, consolidated PBIT is INR 1,129 crores vis a vis last year's 881 crores, up by 28%. For the first time, Coromandel has crossed the INR 1,000 crores mark on PBT. For the year, PBT is up by 42% to INR 1,009 crores. That's from 712 crores in the prior year. Consolidated net profit after tax in the quarter is INR 74 crores. Cumulatively, net profit after tax [ stats ] for the year is 664 crores vis a vis 477 crores in corresponding period last year.Subsidies, subsidy outstanding at the quarter-end is INR 2,627 crores. This is without considering the special banking arrangement of 617 crores, which we received during March 2018. [ In past year ], this number was in the similar range of 2,557 crores. Overall, we have now received on account subsidy up to February '18. As on March 31, 2018, 10% subsidy receivable stand close to 850 crores.As regards working capital, during the year, the average working capital requirements remained comparatively lower than the prior year. Interest costs have come down by INR 46 crores during the year, with the improved liquidation resulting in lower receivables. Balance sheet continues to be strong, with debt equity at .6. Thank you, once again, for joining us in the call, and we'll open it up for question and answers.
[Operator Instructions.] [ H. Argala ], Finvest Advisors.
Congratulations for good set of numbers for the full year. Can you just repeat the volume data which you give for Q4 as well as full year?
For the phosphatics sale for Q4, 5.97 lakh metric tonnes.
That will include DAP also?
The AP and complex. Complex is 5.01. DAP is 0.96. For the full year, complex, 21.68, DAP, 5.99, total of phosphatics at 27.67.
And [ trading ]?
MOP, .53 for the quarter. Full year is 1.72. Urea is 1.34 for the quarter, full year 9.42. And [indiscernible], 1.5 for the quarter, full year is [ 5.22 ].
[ 5.22 ]? As you said in Q4, you mentioned 3 factors that affected the performance. One is obviously increase in raw material cost, depreciation of currency. Which is the third factor you [netted]?
The third one is we had total rental cost, which is [indiscernible] like a onetime cost. We are going through a negotiation for the lease rentals, [indiscernible] in the books accordingly.
So that is the reason why that expenditure has gone up.
Right.
How much was the [indiscernible]?
It is around 35 to 40 crores.
So this will not recur in the next year?
It will not recur in the next year.
We are negotiating this. [indiscernible.]
Is the reason [indiscernible]?
It's for the [ port ].
And as far as CapEx [ run ] is concerned, we said that we are on track to install that [ phosporic ] acid capacity.
Our phosphatic acid capacity, that's on track.
That will be [ where 1 lakh tonnes ], right?
Yes.
Yes.
And how much are total CapEx we would have spent on that?
The total CapEx expected on this project is close to about 270 crores, so some of is initially started. They're all in CWAP at this point in time. The project is expected to get completed by second quarter of fiscal year '19, '20.
So second quarter of '19, '20. Out of 279 crore, how much we would have spent in FY '18?
Not much, about 20, 30 crores, not much.
20, 30 only, so the majority will be spent in '19, and something in '20.
Correct. See, we have placed the orders for most of the critical [indiscernible], and we just had the [indiscernible].
What is the outlook for phos acid prices?
Currently, [ if you see ], phos acid prices have [ wound up ] to around $715, and we expect it to be [ from ] -- we can only get to about a quarter of visibility. We expect it to be stable at this point in time.
Will remain stable for the time?
And it depends on the supply and demand, but overall, we are expecting the -- actually, the supplies to ease up, with some of the -- at least between [indiscernible].
And looking to the subsidies the government has announced, do you think we will have room to increase the market price in case the raw material cost increases?
If you look at it, the industry has already taken the price up during end of January-February. Overall, there was enough of prior stock available, and the price increase has not been totally effective in the last quarter of fiscal year '18. Apart from that, the government is also looking into the currency situation, as well as the raw material prices. They [want to] increase the subsidy rates. We expect -- yes, we expect all of this to pan out in the coming quarters.
In [indiscernible] problem which we hear, is it getting resolved?
See, we had been [indiscernible] which was 18% [indiscernible] vis a vis the output [indiscernible] which was at 5%. After making it a presentation to the government, as we announced in the last fall, the government had reduced the [indiscernible] to 18% to 12%.
It's already done?
Yes, they have reduced it. It is still not at 5%, so we're still going through the [ inverted duty structure ].
The industry has made representation so that [indiscernible] can be brought down to 5%.
And [indiscernible] subsidiary/non-subsidiary is concerned, how much was the EBITDA contribution from subsidiary/non-subsidiary?
For the whole year, cumulatively, [indiscernible] share from subsidy business is at 68%
68%, and 34% was non-subsidiary?
Correct.
How soon do you think we can get to 50-50?
That is part of our long-term vision, so that is something which we are working towards. But obviously, it won't be at the expense of fertilizer. We want to continue to grow both the business.
Do we look forward to major increase in growth through this bio-pesticide which we acquired from EID Parry?
It is definitely a synergistic business which we have. We'll have synergies on both sides. But the main thing is, in the long-term, it tells us to get our crop protection business into the developed markets of U.S., Canada, and Europe.
How was [indiscernible] revenue in FY '18?
[It was 178] crores.
178 crores. And having good EBITDA margin?
Yes, the EBITDA margins are higher than ours.
How much?
The EBITDA margins was in the late -- I think 19% to 20%.
That's very good.
[Operator Instructions] [ Sudochan Apadwanadan ], Sundaram Mutual Fund.
Some of my question is around...
I'm sorry [indiscernible], but if you could please speak a little louder, we can barely hear you.
My question is around the crop protection part of the business, [ where the margin, even ] on a quarter-on-quarter basis as well as on a year-on-year basis, has come off. What I would like to understand is, while you had a year or 2 the rising raw material prices and probably the [indiscernible] in other regions, how do we see the margins, going forward? Because there are a lot of reports that talks about inventory [ years ] [indiscernible] becoming better. Do you think that the increase in raw material eventually can be passed on? And how easy or difficult would that be to you?
Firstly, like you said, [indiscernible] because the [ Brazil ] crop comes in [indiscernible] March. What we have heard is that the inventories are actually coming down. We have to see how much will it pan out to. And so that is something which we are looking at. The second thing which you are planning to do is to look at certain strategic [indiscernible] sourcing so that we can have confirmed orders for raw materials, which we are looking at. In the long run, we definitely see this as an advantage, because with China not being a sourcing supply, India will pick up as a sourcing supply.
In terms of sustainability of the margin, do you think we can go back to the earlier [ ones ], or do you think that you would still be -- the raw material prices would be a concern for you? How do you [ move the ] FY '19?
As we move along, we do think that the margins should ease back to the earlier levels that we had. Having said that, the next 1 or 2 quarters, we're [ seeing] to very closely monitor the China situation, given the Blue Sky policy that they are having and the raw materials shortages that the industry has been experiencing.
The good news is that we have had -- like we said in the call, we have had very good [ turnover ] growth, both in our formulation, domestic business, and in the export business. And that is something we've continued to grow our business. With the integrated, we are putting up integrated crop protection [ structure ], which will help us to -- actually we talk to the farmers, and like we have done for our nutritional business. So we are investing in people and the sources.We are also getting [ deeper ] in crop protection, which will help us even in our tech [indiscernible] and other sources. You have really -- actually emphasizing one of the sources, about the high-quality [ resources ], which will help us to get faster to the market with our new [indiscernible].
Another question from my side is I'm actually looking at your balance sheet. I am seeing that the inventory has gone up as [indiscernible] the payables has gone up. Would my assumption be right that, given the fact that both the phos acid prices are moving up, as well as the raw material prices and the availability of raw material prices on the chemical side [is a little picky], that you would probably have higher amount of inventory at least [ with us ] to meet the demand in case we see a better year forthcoming?
So firstly, what you got it right is the increase in inventory, especially on phos acid, was a deliberate strategy from us. We saw the rising trend happening, and the increased lack of availability, and therefore we build up inventory, and which actually helps us for the next season, which actually helps us in the next season. So that is one thing we definitely see. Your second question [indiscernible]?
Is it also a build-up on the crop protection side?
Not much is happening on the crop protection side. The whole intent is to see how we can leverage our China [indiscernible] and enter into much more strategic [ ties ] with the Chinese suppliers to ensure continued supply and lock in the prices. So we could see some lift in terms of inventory, but mostly it is going to be centered around the fertilizer raw material, as well as aligning ourselves to the DBT scenario is concerned.
Historically, you've been talking about this INR 2,500 per tonne. With the increase in the import materials on the phos acid side, I also agree that -- I understand that there has been some fall in ammonia prices. Net-net, would we still believe that this 2,500 per metric tonne [indiscernible] as the utilization goes up and [indiscernible] plays out?
[ Shoury ], can you -- mind repeating it?
This EBITDA per tonne, historically you had talked about this EBITDA per tonne of about 2,000, 2,500 on the fertilizer side. Now, with the increase in the raw material prices, especially talking about the phos acid prices, would we still believe that the operating leverage that we see in the price hikes that we are taking on the fertilizer side, we should be in a position to maintain the outlook or the profitability on the fertilizer side?
Yes, we do believe that sustainable margins would be in the range of INR [ 2,000 ] to INR 2,500. As we discussed earlier, while the raw material prices have gone up, given that we have multiple sources of rock, and we are [ranging off more] phos acid plants, [indiscernible] in the industry, taking a price increase, all of these should help us on a annual basis to maintain our margins around INR [ 2,200 ] to INR 2,500.
And our strategy continues to build up our [indiscernible].
Currently, what will the split between integrate and non-integrates?
We had mentioned that earlier. 38% is the unique -- [ it's sales we want to keep at ] -- take it up to 50%.
Abhijit Akella, IIFL.
First, just a clarification about the foreign exchange loss element that we spoke about for the quarter. Is it possible to quantify how much that was this quarter?
It is in the range of 30 crores, 32 crores during the quarter. Abhijit, if you look at last year, the corresponding period Q4 of fiscal year 2017, the rupee had appreciated close to about [INR 2.30 by zero-something], whereas this year when you look at it, there is a depreciation of more than 1.3. So on a year-on-year basis, you would see that the comparable on a mark-to-mark basis, there is a ForEx impact that is coming into the books.Having said that, for the full year, given the way we have been managing our foreign exchange exposures, taking forward [indiscernible] and options, overall, the company has made a net gain on ForEx.
On the [ port ] expenses side, is this a backlog that's being cleared, this 35, 40 crores of provision that we have taken? And is this pertaining to prior years also? What is really the nature of this?
Typically, when the lease agreements come in for renewal, it takes few years for it to get negotiated and agreed. So at this point in time, we are based on the estimate that we have, and based on the discussions we have with the [ Portus ] authorities, for the past years [indiscernible], we have taken a provision in the books. The negotiations are still on with the Portus authorities, and, depending on the outcome, if there is any, one time we will get to know. But at this point in time, we have taken the [indiscernible] from the estimates that we have.
You'll probably be paying off substantial debt, going forward, because of your free cash flow generation, but what exactly are the users of funds that you're looking at in terms of possible growth projects or anything else? What are the allocation of proceeds that you're looking at?
For the coming year, for this year, we have planned a CapEx of close to 500 crores. On a normal year-on-year basis, we are about 100 to 150 crores of CapEx, which is a maintenance CapEx. Apart from our normal maintenance CapEx, we also have the [ 4 service ] plant that's coming up, which we discussed some time back. We are also adding some capacity in our CPC plant, one [ in the hedge for ] [indiscernible], and some new additions happening for the molecules that we are planning to commercialize during the year. So put together, close to 500 crores of CapEx is planned.And as you know, we also had the bio-pesticide acquisition of EID Parry. We had paid out the consideration for that in April as per the agreement. And if there are any other opportunities that are raising during the year, the cash [ addition ] will be used for it appropriately.
Vipul Shah, Sumangal Investments.
[indiscernible] in this quarter is around 40 crores for [indiscernible] and 20 crores for ForEx to around 60 crores. Have I understood it correctly?
Yes. Yes, you're right.
What is our annual requirement of phosphatic acid, and what is our captive capacity? And once this expansion is completed, where it will land our captive capacity for phos acid?
The new phos acid is about [indiscernible].
Yes, overall requirement actually, where that plant will get fully integrated, we'll have -- and same thing as [indiscernible], so [ only we'll ] have a capacity requirement for our [ Karnataka ] plant, which is around 600,000.
[Operator Instructions] Rahul Veera, Elara Capital.
You mentioned that you were investing in a few new molecules other than the Mancozeb. Maybe other molecules?
At this point, [ in time I'll be able ] to share with you the molecule's name, but we are currently going through the pilot testing.
They are new, just recent molecules, and we also are looking at combination molecules.
Any particular application for the molecules, like particular crop, particular targeting or anything?
At this point in time, Rahul, we may not be able to share those details. But, definitely as we go along there [indiscernible], we will be more than happy to share these inputs with you.
[ Khouresh Mankotauri ], ICICI Prudential Life Insurance.
On the debt side, we've seen substantial increase in the debt from the December levels. So any specific reason for this increase in the debt? And where do we see the debt levels, going ahead?
During the quarter, depending upon the collections and the subsidy claims, you will see the debt levels moving slightly up or down. We've also seen inventory levels have gone up. So the debt levels are a reflection of all of these.As they move on to their DBT regime and [ we ] start getting [ our ] subsidy collections from the government, and also the GST refund primarily on the inverted duty, which is close to about 330-odd crores, that should ease up working capital further, and also our [indiscernible] limits.
Where do we see the lengthier interest cost actually going? Because Q3 [ we ] had substantially lower level of interest, and Q4 such high level of interest. So next year, how do we see that?
It all depends, as I said. The working capital is one which is controllable within the business, which is going to be primarily our [indiscernible] payable, inventory management. The second thing is dependent on the government. With the DBT regime that kicked in now, we will have to see how the government is going to be dispersing these subsidies. So that's going to be a substantial portion. Apart from that, the GST refund pay, given the inverted duty structure we are in, we would be in a position to file a refund. We'll have to see how quickly government will be able to repay those. So there are internal factors, external factors, that are slightly beyond our control. So based on this current year estimates, we must be around this year's numbers. One must also take into consideration the interest rate that's been hardening across. If you look at the U.S. dollar interest rate, LIBOR has gone up substantially in the last 1.5 years. We are also hearing from our own RBA that they're [indiscernible] on the interest rates, the [indiscernible]. So combination of the requirement, plus the interest rate. Of course, the good news is we continue to optimize different types of launch, including using fee [indiscernible], discounting on all of those to see how low we can keep our interest cost.
One thing that the commenter has mentioned is, on all the outstanding [dues] of DBT, because the subsidy allocation to NPK, like we mentioned last time, has gone up by [ 34% ]. So we do expect the government may end up being the balance DBTs [indiscernible], and they started the process. So it depends on how the government pays on this.
Can I get a break-up of the debt in terms of how much is related to the subsidy, how much is related to GST, and what would be our working capital and long-term?
We don't give any long-term data. We also shared with you the total subsidy [reviewable] from the government is about 2,600 crores. And then, in the GST, overall credit is close to about 500 crores for the company, out of which 350 crores is a refund due from [indiscernible] inverted duty structure.
This the same data for December quarter?
I will have to follow the number for December quarter. I don't have it right away with me. We can take this question offline. I can share with you the details.
You had mentioned that 600 crore subsidy has been received in the special banking arrangement. So how are we supposed to look at the next subsidy that you receive from the government would be 2,000 crores as of 31 March, or just 2,600 crore?
2,600 crore. That's equivalent 17 crores which was given through a special banking arrangement, has been cleared by the government in April.
Amit Murarka, Deutsche Bank.
Just on Mankozeb, you mentioned you're expanding capacity. Can you just [ detail ] by how much are you expanding it here?
The capacity expansion is about 10,000 tonnes.
10,000, so you'd expanded by 10,000 last March also?
We [indiscernible] 10,000.
So currently, what is the [indiscernible] here?
Our [indiscernible] capacity is about 35,000 metric tonnes.
All [indiscernible].
And your Mankozeb would be what percentage of your crop protection business?
It's close to about 50%.
Close to 50%, sure. And the CapEx of 500 crores that you mentioned was only in FY '19?
This is only for FY '19.
And over 2 years, what would the CapEx be, broadly?
Most of the projects that we are speaking are happening in the current year. So normally every year on an annual maintenance rate, we used to have about 100 to 150 crores. If we are going to have newer molecules or other additional projects, which currently we don't have as much, I would expect '19, '20 also to be in the same range of 150 to 200 crores.
And you said your [indiscernible] INR 2,000, INR 2,500 end of Jan-Feb. So what would have later for the AP? What is the current market price [indiscernible]?
The current market price for the companies are in the range of 34,000 metric tonnes.
And what would -- broadly would have in the average [indiscernible]?
Normally if you look at it, we are in the range of 2,300, 2,500 crore metric tonnes. And for [ 40 ] [indiscernible], it would take a full year review rather than taking a quarter-by-quarter view.
The [ answer ] I'm trying to get is, since phos acid has gone up, so you think it might be currently about 24,000 [indiscernible] for the AP, so what was the average utilization in 4Q?
As I was mentioning, between the quarters, depending on the season, you will see variation. And the guidance that we have been providing is for the whole year, if you look at it. We should look at it INR 2,200 to INR 2,500 per metric tonne as margin. And [indiscernible] that we are currently in, and we expect that to continue even in the foreseeable future.
And last one is market [inventory]. [ You said it's just 9 ] lakh metric tonnes, right?
That's a total.
This is for complex plus DAP what?
[Indiscernible.]
[ Suman Kumar ], [indiscernible].
EBITDA [indiscernible], you talked about around INR 2,200 to INR 2,500. Is only for manufacturing fertilizer, or including of [indiscernible]?
As you know, it's from manufacturing. As you know, we hardly do any puts.
We are not talking all [indiscernible] business here?
This is manufacturing.
This is manufacturing.
Can you tell me what is the revenue of other [indiscernible]?
Sorry, what is our [lag] business?
[indiscernible] the [lag] business, what you're giving in the annual report you are reporting for [indiscernible] of CD and plant production, then you are giving other [indiscernible] business, also.
We have a range of about 600 crores.
Well, [indiscernible] crore, so it has declined from [ 700 ] to [ 600, though ]?
No, let me -- we'll come back to you. I think it's in the same range. The margin increase is also there.
10% [ there's been turnover ].
Nitin Gosar, Invesco Mutual Fund.
Question was pertaining to the margin guidance again. I think [indiscernible] probably would have offered the margin guidance that you particularly give, but the upcoming year, your guidance is between INR 2,200 to INR 2,500. The understanding was that you were taking a lot of steps which would particularly give you a challenge to overshoot that guidance, going forward. But, right now, I think the guidance is still around INR 2,200 to INR 2,500, so the underlying impression is that the raw material inflation is the limiting factor.
Not really. The thing we continue to improve are [ unique grid ] sales, and we have always said that helps us to get [better] margin. Also, with the expanded capacity of phos acid and also alternate growth strategies, we expect the margins to continue to remain better than what it is. And like we have said in the past, once the phos acid comes, we'll actually have a much more -- it will be another INR 500.
And this phos acid capacity will be only applicable from Rabi season onward?
Second quarter of 2019.
But that's where the commissioning will happen, but the year production would have already taken place for the current season by then.
Not really. This is -- asset which you have, which you plan to have it for current. Once you have production, you have to use that acid.
So keeping in mind this phos acid production and the integrate [indiscernible] which you talked about moving toward 50%, the margins actually only inch upward from 20 to 25 to [indiscernible]?
We had mentioned that earlier also. That's what we expect.
Aniruddha Joshi, ICICI Securities.
Can you indicate the pricing that you mentioned in January, so what will the price hike? And in which products we have taken pricing and the quantum of the price hike? Secondly, on [indiscernible], they're launching some combination products. So I guess the [indiscernible] chem industry we are seeing most of the domestic players are looking at launching combination products, and some are going at it and launching -- getting [indiscernible] potential, as well. So what is our strategy? When do we see the launches, whether it will be in Kharif season, or we will have to wait for Rabi season? So can you throw some light on that?
On the pricing side, the industrial has already taken a price increase end of Jan, but it's going to get [indiscernible] range from 24,000 metric tonnes. [ Later on ], the prices were in the range of 20,700 metric tonnes. So that was the right increase. And this is what you've seen across the [indiscernible], so that's how this has happened. As far as the combination molecules are concerned, we'll let you know as the launches happen.
So we cannot share anything right now?
We are planning few combination molecules, and, more importantly, we are also looking into some of the molecules that have recently gone [generic] for our technical exports. So all of those have been planned out as part of our pipeline. So at this point in time, we are constrained in terms of revealing any further detail, but closer to the time of launch, we will definitely be sharing it.
[indiscernible], Excelsior Advisory.
You mentioned your annual requirement for phos acid. Can you just repeat it?
6 lakhs tonnes.
6 lakhs tonnes. And how much are you -- said that your expanded capacity, how much will be in-house production, how much will you be importing?
In-house is close to 2.5.
In-house is 2.5 lakh? And the remaining 3.5 lakh you'll be importing?
Yes.
And for that, you have a back-to-back [ tie-up ] at [indiscernible]?
We have a total requirement of 8.5 lakh tonnes, 2.5 of that capital, 6 lakhs tonnes is what we go and source from our [ CTG ] suppliers.
And does the [ final ] negotiation for that happen once a year, [ or all the time ]?
It happens on a quarterly basis.
A quarter-to-quarter basis, sometimes if it's at [indiscernible] quarters.
[ Sonal Gandi ], UBS.
Just wanted some clarification. If I look at the EBIT margins for crop protection business, they are about 9% of [ portal ], and then you have some one-off items. So if I exclude that, what would be the crop protection margins? Because what you've given us for the entire company on an overall basis, but if I'm just looking at crop protection, how much would be attributable to this?
So the one thing is not related to crop protections, the [indiscernible] that we spoke. And then sustainable data, we have been at a crop protection margin of about 15% to 16%.
And secondly, again a bit of clarification phos acid. So your total requirement is 8.5 lakh tonnes, out of which 2.5 is in-house right, and 6 lakhs is imported.
Correct.
And [indiscernible] capacity augmentation, new capacity addition, what would be the in-house production?
It will grow by another lakh tonne.
So the [indiscernible] -- again, we have 3[plants]. Two of them are in [indiscernible], and one is a plant that we get [indiscernible], and one is a plant that we own import asset. So that's how it is. Both the plants which we have, and we can always do a mix and match, so both the plants which we have will become fully integrated plants.
So you said that the market prices for DAP has gone up from 20,000 to 24,000. Is that right?
No, the prices have gone up by INR 2,000 to INR 2,400 [indiscernible]. So it was earlier 22,000, which has now gone to 24,000, 20,700. From there it has gone up. So the range of increase is around INR 2,000 to INR 2,400.
And this would roughly be, what, 70% of -- that the prices have gone up? And if I look at your DAP prices, import prices, so that has also gone up by 8%. So is that not really taking care of your raw material? There should not be any raw material headwinds, at least for Q1, is what my understanding is. So just wanted to understand it from you.
Yes, this should take care of all the increases that have already happened. And we also carry some [indiscernible] with this as part of our inventory management. So this would definitely take care of the price increases that have been under the amounts would take care of the higher raw material prices that we have seen in the last quarter of '17-'18.
The industry did carry some old price stocks, which is another thing. And therefore, you'll see the price coming in now.
What one should also look into is how the currency behaves, what are the other key raw material prices. You see ammonia is softening. [indiscernible] we are seeing some softening trends. But, as this outlook for phos acid has continued to [dictate it]. So overall, if you look at the raw material prices, the way they have been behaving, plus the market price increase that the industry has taken, and the subsidy increase the government has announced, it should all pan out even for the coming quarter.
What was the planned capacity utilization in Q4? I missed on that number.
The planned capacity utilization in Q4 was--.
-- 70%.
[indiscernible] earlier and [ were turned around ].
And you had the plan to shut down for the whole of March, or just few days?
So it depends on where [ the lines goes at with this time ], so that's how we look at it.
Thank you. We'll take that as a last question. I would now like to hand the conference back to Mr. Rohan Gupta for closing comments.
Thanks, Ayel. So just before we end, just only a couple of things on my side, on this Mankozeb [ price of ] where we are significantly dependent. So has there been any pricing pressure on Mankozeb, or it's just because of higher inventory, and we had to take some inventory write-down in our numbers?
Rohan, we do not have any inventory write-down in our numbers. Pressure on the...
The margin pressure in Mankozeb is [indiscernible] chemical business?
It is [indiscernible] leading to the higher raw material prices that we have, given the China factor.
Okay. So when you are looking for the strategic raw material supplier, this is also you are going to base in China only, that some supplier you are looking from China for a long-term supplier of raw material, right?
Absolutely.
You are still not looking for your own manufacturing setup in India or sourcing it from India, given that China -- we don't know how long they'll be able to supply us the raw material?
So these are all part of the sourcing strategy that the company have been having. There are certain raw materials we continue to source from India. There are certain that we look into for import purposes. So how to further optimize, how to tie up strategically so that we do not see these sudden spurts coming in is something that this sourcing team is working on currently.
And if it came to 16% margin in agrochemical business, you are expecting that will be there in [indiscernible] next year, or the continued weakness, as you also mentioned, that Q1, Q2 may be weak in agrochemical, so that 15%, 16% margins holding on that will be tough for the current year?
We will have to wait and watch how the whole situation pans out. In a normal year, we definitely expect 15%, 16% at a higher percentage in terms of a better margin for the CPC business. The next 1 or 2 quarters, we'll have to see how the raw material prices availability is coming up. The Mankozeb quantity that can be lifted in the export markets also needs to be looked into. Last year, good news as we have seen, the molecule is growing. That said, we are also adding more [indiscernible] capacity in our plants.
And the good news is that the main market, the inventories are coming on with the bigger crop [indiscernible].
In [ Brazil ]?
Yes.
And we don't [indiscernible].
Sorry?
Our exports are much more diverse.
Okay, in order -- dependent on [indiscernible].
That's the main market. So overall industry inventories come from there.
And just to close that, you mentioned the phos acid current quarter price above $750, if I'm not wrong, right?
[ 730 ].
[ 730 ]. I think this is for that in [indiscernible] from what we have seen in Q4?
Yes, it was...
$678 in Q4. The current rate is about $713.
So this $50 increase which has been there, will we be able to pass it on further? Because I think the subsidy rate the government has finalized, that was based on $680 prices of phos acid. So this [indiscernible] of phos acid, are we covered for that, or there can be -- it can put some pressure on margins?
[ We'd have ] to look into the key raw materials, Rohan. While the phos acid prices have firmed up, we also see that the prices of ammonia and [indiscernible] other key raw materials have been softening. So when you look at it on an overall basis, the current raw material prices, the increase in the subsidy announced by the government, the price corrections that the industry has taken, all of those would be sufficient to manage coming quarter and the next quarter. We'll have to still wait and watch this for the reduction in the raw material prices, [ brilliant ]. If it goes up, what pricing the industry has to take will be something that everyone will be going through.
Okay. Let me understand the [indiscernible] of time, would we be allowed to take one last question from one client?
Actually, no, we have another meeting scheduled. We can take this question definitely offline if that's -- that would be a better...
So I thank you for giving us your available time and giving us the opportunity for organizing this call. I thank both of you. I also thank all the participants for joining in the conference call of Coromandel. Thanks, everyone.
Thank you, and really appreciate your [indiscernible], and we are very pleased with how we have done for this year, and we continue to believe that we are on line with our long-term strategy.
Thank you, sir. Thank you very much.
Thank you all.