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 Q4 FY '22 Post Results Conference Call, hosted by Batlivala & Karani Securities India Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Harmish Desai from Batlivala & Karani Securities India Pvt. Ltd. Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome to the fourth quarter and full year earnings call of Coromandel International Limited hosted by Batlivala & Karani Securities. From the management, we have Mr. Sameer Goel, Managing Director; Ms. Jayashree Satagopan, CFO; Mr. Mayur Gangwal, GM, Finance. I would like to thank the management for giving us the opportunity to host this call. We will begin the call with opening remarks from the management, post which, we will have a Q&A session.
Thank you, and over to you, sir.
Thank you, Harmish, for organizing the conference call. Can you hear me?
Yes, sir, we can hear you.
Okay. We will give an overview of the business environment experienced during the quarter, followed by the company's performance, and then we'll have the Q&A session.
Firstly, when we look at the global economy, the global economy experienced a swift recovery in 2021, the robust demand revival [indiscernible] with the investment and resumption in merchandise trade. The growth was supported by fiscal stimulus extended by the government leading to a strong consumer demand. As per the World Bank estimates, the economy is expected to grow by 5.5% in 2021. Last year, it had a growth of minus 3.4%, with the advanced economies growing at 5% and the emerging and developing economies growing by 6.3%.
As the world steps into the new year, the global economy recovery is facing significant headwinds amid the new waves of COVID-19 infection, labor market challenges, supply chain disruption and rising inflationary pressures. The war in Ukraine and economic sanctions on Russia have put global energy suppliers at risk, pressure supplies around 10% of the world energy, including 17% of the natural gas and 12% of its oil. For the Russia and Ukraine, which together account for 28% and 18% of wheat and corn global trades, pose a significant risk on food security, especially in the low and middle income countries.
Going forward, the geopolitical uncertainty, COVID-19 flare-up, rising commodity prices, physical stress and likely monetary tightening can impact the speed of economic recovery. And the World Bank has forecasted that the world GDP to grow at a modest 4.4% in 2022.
Coming now to the Indian economy. India has posted a strong recovery during the year and is estimated to grow by 8.9% in '21, '22, subsequent to a contraction of 7.3% in 2021. The recovery has been broad-based at all levels, including aggregated demand, which includes private consumption, having recuperated and surpassed their respective pre-pandemic level, and real GDP is expected to surpass the pre-pandemic level of 2019, '20 by 1.8%.
India starts its vaccination program -- started its vaccination program from Jan 2021, and the course of the year has administered more than 180 crores vaccination. With the vaccination program having covered the bulk of the population, the economic momentum is building up. And as per the Reserve Bank of India forecast, economy is expected to grow at 7.2% in '22, '23. India is likely to remain one of the fastest-growing large economies in the world.
Coming on to agriculture. During the year, India experienced a normal Southwest and Northeast monsoon, which supported the higher kharif and rabi sowing. As per the second advanced estimate, food grain output is expected to grow by 2% to [ 316 ] million tons. Horticulture sector is also picking up in the last few years. And during the year, the production is estimated at 333 million tons, similar to the level of last year.
Indian agriculture export crossed USD 50 billion for the year '21, '22, a growth of 20% over last year, with major contribution coming from cereals, sugar, marine and cotton segments. But [ reading ] the 18% export growth registered in FY 2021 and logistic challenges in the form of higher freight rates, container shortages encountered during the year, the trend is highly encouraging and signals competitiveness of Indian farm. With changing agri landscape, evolving consumer preference, digital accessibility, the Indian agriculture is shortly getting transformed. The farm input segment can compete significantly towards promoting integrated crop management, improve soil health through balanced nutrition, helping technology to [ speed up ] product, improving water efficiencies through micro irrigation, offering farm mechanization and promoting sustainable farming methods.
Agri GVA is expected to grow at 3.9% in FY '21, '22 versus 3.6% last year. The reserve levels in the country remains at 128% of long period average. With first consecutive year of good monsoon, agriculture continues to be the sweet spot in the Indian economy.
Coming now to the fertilizer industry performance. I hope I'm still audible.
Yes, sir, you are audible.
Okay. Global supply shortage of key commodities continued in quarter 4 and resulted in higher prices and delays in the [indiscernible] shipments. The industry has witnessed skyrocketing prices of key raw materials with the Russia and Ukraine war and emergence of COVID waves in China, apart from the protectionist policies. Shortage of containers continues through the quarter with rising prices and uncertainty in container availability.
On the agriculture input side, there have been an increase in demand with record production and high price realization. For the quarter, DAP and complex industry trending sales volume was down by 26%. Last year, it was 28 lakh metric tons vis-à-vis 38 lakh metric tons last year. Major raw material prices continue to remain high. Government has announced a special package for DAP and 3 generic gates for rabi season and has supported the industry by ensuring timely disbursement of subsidy. NBS rates for year '22, '23 are announced on 27 April 2022. Subsidy approved by the cabinet for the NBS kharif 2022 from 1st April '22 to 30th 9 2022 will be INR [ 60,938 9.23 ] crores, including support to indigenous fertilizer SSP through freight subsidy and additional support for indigenous manufacturing and import of DAP.
For the year, DAP and complex fertilizer industry primary sales volume was down by 15%. It was 186 lakh metric tons versus 2.9 lakh metric tons last year.
I'll now hand over to Jayashree to talk about Coromandel performance.
Thank you, Sameer, and good afternoon, everyone. I will now provide the update on the company financial. Coromandel recorded a consolidated total income of INR 4,304 crores during the quarter and INR 19,255 crores during the full year vis-à-vis the same quarter.
One moment, please. Standby, please. Just 1 minute, please.
Before going on to the financials, let me also cover some of the business aspects. Coromandel displayed a resilient performance during the year, registering a strong growth across the business segments. This was despite the fact that we had uncertain business environment, initially impacted by COVID-related interruptions, followed by geopolitical uncertainties, causing supply chain disruptions and also from raw material scenario all through the year.
Coromandel registered revenue growth of 50% during the quarter and 35% during the year, driven by both Nutrient and Crop Protection business. Coromandel ensured that agri inputs are made available to the farmers in its key operating market and promoted the use of balanced nutrition, including organic fertilizers to help rejuvenate the soil and improve farm productivity.
Coming to the company's Nutrient segment performance. the Nutrient and Allied business segment revenue increased by 57% during the quarter and 37% during the full year. Companies trust to provide specialized fertilizers and greener solutions to the farmers has gained further momentum in our markets.
We launched 2 new products in this segment during the year, and both products have registered a good growth in SND and Organic segment. On the sales front, in Q4, DAP plus Complex volumes was at 6 lakh tons, slightly higher than last year, which was about 5.9 lakh metric tons.
For the year -- for year-to-date, DAP and Complex volumes was at 33.2 lakh metric tons, which was 33.5 lakh metric tons during the previous year. Manufactured DAP and Complex volume was higher by 6% during the quarter and 2% for the full year. Imported product volumes were lower during the year. It was lower by almost 28% during the quarter and by 19% for the full year.
Company's market share in Q4 was 22.1%, and for the full year, 17.9%. During the previous year, for the corresponding period, the market share was [ 15.3 ] [indiscernible] and 15.3% for the full year results. SSP quarter 4 sales was at [ 1.2 lakh ] metric tons, with decline of about 11% over last year. However, for the full year, the sales was at a record 7.56 lakh metric tons, registering a growth of 13%. Our market share improved to 14% from 12% in the previous year for the same quarter.
The commercial teams ensure timely availability of raw material to enable continuous production at all the manufacturing plants. During the quarter, our DAP and Complex fertilizer plants operated at 73% capacity and 83% during the year. We produced 6.3 lakh metric tons of fertilizer during the quarter. And for the full year, it was 28.9 lakh metric tons. The quarter-end production continued to remain high during the quarter.
Progress on our key CapEx projects is as per schedule. Work on the major CapEx, which is sulfuric acid plant, has been started and is progressing well. To further enhance the SSP plants, Coromandel has upgraded granulation facilities at Udaipur and has also taken a new facility at Ennore lease for manufacturing of SSP.
Our technology teams are working on nano liquid and fortified fertilizers to further enhance the productivity of the nutrients. On the crop protection side, CPC business registered a growth of 11% in revenue terms for the quarter and 21% during the full year. There has been supported by good performance across all the segments, export, B2B domestic and formulation.
The increase in raw material costs and the lag in cost and pricing has resulted in certain levels of stress in the margin. During the [indiscernible], the business received 6 new registrations, the highest ever in any single year. The business also received [ 10 B2 ] registrations, several environment, including label expansion, and has submitted [indiscernible] for novel combinations. The new products launched by the company this year has gained good traction in the market. The business has built in a very rich product pipeline backed by strong R&D capabilities and is also [indiscernible] to further strengthen each product offering in the market.
On the manufacturing front, CPC plants operated at a capacity of around 70% for the full year vis-à-vis at 63% during the previous year. Work is in progress setting up new plants for manufacturing of herbicides at [indiscernible]. We are awaiting approvals from the regulatory authorities to commence production.
The retail stores operated by the company performed well during the quarter, providing all-round agri-solutions, including products from advisory and mechanization processes. Retail business has improved its operational efficiencies, leveraging technology to reach out to the farmers, and 92% of the stores are currently profitable. We've also seen a good turnaround in the stores in Karnataka during the quarter.
In its digital transformation journey, Coromandel has taken significant steps in the last 1 year with the adoption of business intelligent dashboards, sales force productivity tools, and robotic process automation. This has improved the process efficiency and forecasting capabilities of the organization. Healthy reservoir levels and expectation of a normal monsoon all goes well for the upcoming kharif season. Coromandel shall continue to work to fulfill the needs of the farming community through its innovative products and farming solutions.
I will now cover the financials and the results of the company. Starting with turnover. Coromandel recorded a consolidated total income of INR 4,304 crores during the quarter and INR 19,255 crores during the full year vis-à-vis same quarter prior year, where the turnover was INR 2,872 crores for the quarter and INR 14,257 crores for the full year. This represents a 15% revenue growth in the quarter and 35% for the full year.
Nutrient and Allied businesses contributed to 87% share. The balance coming from Crop Protection business. The percentages are the same for the [indiscernible] year.
Subsidy versus nonsubsidy share of business stands at 82% and 18% during the quarter and for the full year, 81% and 19%. Corresponding numbers for the previous year, 74% and 26% for the fourth quarter and 78% and 22% for the full year.
I'm moving on to the profitability. Consolidated EBITDA for the quarter was INR 417 crores vis-à-vis INR 262 crores of last year. EBITDA for the full year is INR 2,196 crores vis-à-vis INR 2,023 crores of last year.
In terms of the subsidy and nonsubsidy shares, it stands at 59% and 41% during the quarter and 70% and 30% for the full year. Previous year, the ratios were 55% and 45% for the fourth quarter and 72% and 28% for the full year. Net profit after tax for the quarter was INR 290 crores in comparison to INR 156 crores for the corresponding quarter last year. For the full year, net profit after tax stood at INR 1,528 crores vis-à-vis INR 1,329 crores during the previous year. On the subsidy front, during the quarter, company received INR 2,618 crores towards subsidy results. The comparable figure for last year was INR 2,943 crores.
For the full year, company received a subsidy of INR 7,077 crores vis-à-vis INR 5,014 crores in the previous year. Subsidy outstanding as on 31st March '22 was at INR 294 crores vis-à-vis INR 590 crores during the previous year.
I will now cover the interest income. During this quarter, company earned net interest income, excluding the IndAS interest of INR 32 crores vis-à-vis interest income of INR 7 crores in the same quarter last year. For the full year, company earned a net interest income of INR 66 crores vis-à-vis INR 28 crores of interest cost in the previous year.
Company's balance sheet continues to remain strong with 0 debt. Company maintained its surplus fund in Board-approved securities, and these are earmarked for specific growth-related investments, which the company is currently pursuing.
On the ForEx front, we have seen that the rupee has been quite volatile in the last quarter, moving in a broad range of INR 73.70 to INR 76.90. Company continued to follow a very conservative approach in terms of hedging and managing its ForEx exposure, and this has been managed quite well.
On the dividend front, the company and its Board had approved an interim demand of INR 6 in February, and this was paid out in March.
The Board, in its meeting held on 28 April '22, has recommended a final dividend of INR 6 per share. With this, the total dividend for the year is INR 12 per share. It corresponds to the dividend of INR 12 per share declared in the previous year as well.
Thank you all for your interest in Coromandel and joining us on our call today. We will now open the session for question and answer.
[Operator Instructions] The first question is from the line of Vishnu Kumar from Spark Capital.
My first question is on the margin.
Sorry to interrupt you, Mr. Kumar. The audio is very low.
Hello? Am I audible now? Hello?
Yes.
Yes. Sir, the first question is on the margin outlook. Can you help us understand how you kind of look at margin, say, for the next 6 months or 1 year, given that the subsidy revisions have taken place. Now is there any change in outlook from what you thought previously?
Vishnu, we have seen that way before the government has announced the new MBS rate, which is also in line with the increase in the raw material prices that we have seen in the industry, currently, the outlook for raw material continues to be firm, and this release by the government should actually help in sort of offsetting some of the increased costs.
As far as Coromandel is concerned, we think the profit level would be similar to what we have seen in the past. We are expecting close to INR 4,000, INR 4,500 per metric ton in terms of EBITDA on manufacturing products. The backward integration undertaken by the company a couple of years back, especially on the sulfuric acid plant, has actually helped in the last year's performance and we believe that it will continue to help us going forward as well because the value gap between bought-out assets and manufactured assets would help us to regain the margins even as we go along.
And we are also looking at debottlenecking the PA plant, both at Vizag, PAP 1 and PAP 2, to see how we can increase the capacity utilization and also [ move the tiered ] production to close to 1,350 tons per day. So the value that's captured is going to be critical for us, and we think that will actually play a very key role, apart from the flexibility that the manufacturing plants have now developed in processing various kinds of [ growth ], which also helps us to take advantage of the cost of manufacturing. So that's as far as fertilizer is concerned.
For the crop protection, you would have seen this year has been witnessing high RM prices as well. However, some of the new products, especially on the formulations that have been introduced, have held up to get a better margin on our domestic formulation. There are 4 more products that are planned for the coming years, and those would be introduced in June '22. There are combination products as well as products that are coming out of our captive generics, and therefore, we believe this would help us in further strengthening the margin.
We did have a lag between the cost and the price, which our teams are also trying to address. And you would have seen that partly helping us in Q4, and we expect that momentum to continue. On the technical front, too, we are looking into 3 new molecules and [ NPTs ] are coming up for that. So overall, the crop protection side also, we should see the margins on an upward trend.
Yes. Helpful. Just a couple of follow-ups there. So one, on the backward integration, so we are roughly around 60%. So what is the extent to which we can achieve? And what is the limitation for us to not to get to 100%? That's one.
And second thing, on the recent subsidy increase, whatever that has happened, coupled with the MRP price increase, whatever we have taken. So based on current levels, do we have some headroom in our existing NPK grades for absorbing any further cost increase? These are 2 follow-ups.
Okay. So as far as the phos acid is concerned, we used to import somewhere close to 5.5, 6 lakh tons of phos acid until a couple of years back. Currently, we are expecting this to be around 3.5 to 4 lakh tons. With the product mix that we are evaluating, this could further come down. We tend to the operator that had been commissioned at Vizag has actually helped us to also concentrate and move the phos acid to Kakinada.
For us to get 100% captive, we may have to look into another PAP plant. And this also has considerations in terms of rock availability, environmental clearance, approval, so on and so forth. So currently, our strategy is to see how do we minimize the import of our profit by increasing the throughput in the existing facilities.
When we had both PAP 1 and 2 coming in, the capacity of those was about 1,100 to 1,150 metric tons per day. We are gradually moving it up to, say, 1,300 to 1,350 tons per day, which will further reduce the requirement from the 5.5 that I was speaking to, say, 3.5 to 4.
[ Even if a note ], we are now 100% using our own acids. It's only for the Kakinada plant, which is not a fully integrated plant. We will continue to have imported acids. So until we put up another plant, we will not be in a position to get to 100% on our own.
On the other hand, we have JVs in Tunisia and South Africa, where our operations teams are going there to further support and see how we can maximize the throughput. Both these been having some challenges, one or the other over the last 2, 3 years. In Tunisia, we had 3 of our engineers. Now our partner is also having a few more sent. So that's the way we are trying to manage the phos acid.
As far as the question in terms of how will we be able to manage the cost increases of raw material, it also depends upon the grades. So there is a mix -- there are certain grades where if we are not going to be profitable and there are certain other grades that are going to be profitable. The mix is going to play a key role, and Coromandel will be working on it. Thank you.
Mr. Kumar, may we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Ankur Periwal from Axis Capital.
Congratulations on a good set of number. So first question on the crop protection side. While for the full year, we have shown 20%-plus revenue growth there. And there is -- you mentioned in the opening remarks, there are new products launched there, both on the formulation as well as the combination side. So just wanted your thoughts in terms of how should we look at this business from a 2- to 3-year perspective in terms of growth.
So I think, firstly, there is ample scope for crop protection to grow even while we had a strong double-digit growth, there's opportunity to grow further because the base still has to increase, and we are doing several things on that. Of course, we need to ensure full raw material availability to ensure that the technical plants are fully operational. So that's one thing. And we'll to continue to grow both what is called our international markets, domestic B2B and also a lot of scope in the formulation business to grow. So that's where it is.
And the other strategies, like Jayashree was saying, is to go for the new generation projects and the combination project, and we have a huge pipeline of that, which actually helps us with better margins. And not only that, they are more effective use and adopted by the farmers. So we see that business doing -- continuing to do well. And we hope that the margins also will improve as and when we keep introducing new molecules. So that's been -- going to be our strategy. We'll also look at any other inorganic growth opportunity which may come along there.
Sure, sir. And the earlier geographic distribution that we had talked about in the domestic market itself, is that expansion on the distribution network side largely done? And we should be seeing the benefit of that M&A acquisition ahead or it's still work in progress?
There is -- there are 2 things we are looking at business to grow. One is we have to still leverage a lot while we have done better, but there's still a lot of scope for the business to grow, particularly in our key markets of AP, Telangana and Karnataka, Maharashtra and MP.
Now one of the strategies which we have is to leverage the strength of our fertilizer distribution to ensure that we fill up whatever gaps are available and also to have a stronger agronomic and demand creation structure on that. So there is still a lot of scope.
At the same time, we have areas where, because of the new molecules, including combination, which you are having is to address all the growth, all the applications which the plant may require. So we are bridging the gap at some stage. Take paddy cultivation. It only was at 20% to 25% of the need of crop protection. We have moved this up to 60% to 70%, including -- and we are basically more centered towards insecticide and fungicide. Now we are actually completing the entire cycle. So that is the progress which we are making. And hence, there's a lot of scope for our Crop Protection business to grow, given our strength and [ the fact ] on the fertilizer side and also our retail outlet, especially in AP/TG and Karnataka.
Sure, sir. That's helpful. And my last question on the capital allocation side. Now on the balance sheet, we already have around [ 3.5 to 1,000 ] crores, and we are generating incremental, give and, INR 2,000 crore plus every year. You did mention that we'll be debottlenecking some retail fertilizer capacity there. So any thoughts there in terms of how should one look at the capital allocation [ incentive ]?
Yes. For the way we are looking at capital allocation is to see how we can further strengthen the [ production ] integration for fertilizer. There's a good amount of CapEx is being planned for it. We had, last year, approved the SAP 3 plant, which is about INR 400 crores. And most of the work will get completed this year, almost 90% of work should get completed this year.
We're also looking into some debottlenecking, as I was mentioning earlier, on the PAP and also in some of our trains. Apart from the normal processes will be there, the main area where we are focusing currently is also to see how we can further strengthen on CPC, with the new multipurpose plant. The business has come up with a proposal, and we are also looking into further strengthening on the buyer side.
Now there are opportunities around the specialty nutrients, especially on the liquid fertilizer. Last year, we had launched a liquid -- commissioned a liquid fertilizer plant. We are looking at further expansion there. These are all what we are planning internally, where the CapEx could be around INR 750 crores to INR 800-odd crores. Beyond this, we're also evaluating any good inorganic opportunity. So that's how we are looking into the use of surplus funds and capital allocation primarily is going to be for the high EBITDA businesses, which comprises of CPC, Bio, SND.
Sure, and that's encouraging. Just one clarification. The INR 700 crores to INR 800 crores CapEx is over next year itself or it's over a period of time, over 1 or 2 years?
The coming year, this year, this year.
And if the broad breakup here will be out of INR 800 crores, INR 400 crores is going for the sulfuric acid plant, and the balance will be for the other projects which you mentioned.
Exactly.
The next question is from the line of Tarang from Old Bridge Capital.
Congratulations for the transformation that the balance sheet's seen from about $200 million in March '22, now with $500 million of cash.
Two questions from my side, actually 3. I mean, incrementally, however one slices and dices, the conclusion that I get to is that the profitability on a per ton basis for the manufactured business has increased, contribution per ton, successively FY '21 over '20 and now '22 over '21. Without getting into specific numbers, just wanted to -- if you could probably give us a sense in terms of what has really driven this contribution in this year if -- on a descending order. I mean there is obviously the spread between rock and acid. There are rock procurement efficiencies and maybe perhaps better pricing or some other reason that I may not be aware of. So if you could just give us some sense on what has driven this, that's number one.
Number two, if I look at your Crop Protection business, the business, while on the top line, has grown at about 20% profitability. For obvious reasons, has not moved up about 6%, 7%. Now I understand this business has 3 parts to it. The domestic formulation space, the domestic technical space and then there's the export piece. So if you could give us a sense on what went right and where were there margin pressures in this financial year.
And last, in the phosphatics manufacturing piece, what proportion of your manufactured phosphatics volumes would be DAP? That's it for me.
Thank you. Let me take your first question in terms of what's driving the profitability. Obviously, as you said, the [ amortization ] is deep. PAPs have been very helpful. We are also looking into SAP as we go along. A lot mix, the flexibility of the plant to process the [indiscernible].
Getting the raw materials at the right time, at the right price, ensuring the plants are not going through any shutdown. Capacity utilization declines have been very good. Control on fixed costs has also been extremely good. We have been taking selective pricing. The pull of the brand has been phenomenal. For instance, the growth [indiscernible], I think it's not just the grade. The economic structure is actually helped in terms of creating the awareness and pull for products. Finally, it's also about the mix management, given the dynamic movement of raw material prices, how do we optimize through the right mix so that we maintain our profitability and enhance it [ for the trading time ]? I think these are broadly the preferred items one can look at in terms of how we've been managing and trying to improve our margins.
As far as your second question on as far as CPC is concerned, good growth over the last year because the previous year, you also had a bit of a challenge in the first quarter. Because of COVID, our plants were not able to operate at full capacity. So plant utilization has been up compared to the previous year.
The domestic formulation, we've seen an increase in our margin profile, whereas we have seen some amount of stress in our export markets, mainly on [indiscernible]. As we mentioned earlier, looking into Europe, technical as well as formulation is going to be the key for us to enhance the margins in the Crop Protection business. And we are currently working on a good pipeline of [ product there ].
The third one was on how much of DAP do we manufacture? Yes. In the phosphatics, I would say about 7%, 8% would be a share for DAP. And we can produce more if we do our other grades of NPK vis-à-vis DAP given the consumption in DAP is going to be higher. Wherever we are able to get DAP at reasonable prices for imports, the company has been following a strategy of manufacturer as well as efforts to meet with the requirements in the market.
I missed that number. Was it 8%, you said?
Yes, it's between 7% to 8%.
The next question is from the line of Bharat Sheth from Quest Investment Advisors.
Congratulations, Sameer and Jayashree for excellent performance. Hello?
Yes. Thanks, we can hear you. Thanks, Bharat.
Hello? So the first question is on this sulfuric acid plant. So when is expected to commission? And how much this can add to the contribution to the gross margin once it is commissioned?
So we will probably have it by June of next year, if all goes to plan. So you can expect it to meet the kharif requirement for next year. And this is more of an intermediary, which we have found it helps in the times when the sulfuric prices are high, is the question. So we will be reducing our dependence on imported sulfuric acid as compared to doing in-house manufacturing. And it will give us flexibility for us to look at and at that kind of pricing flexibility to see whether we want to import acid and then burn it or we need to do our own manufacturing.
Okay. And is that fair understanding that it also is part of the increasing -- allow us to increase the phos acid capacity?
It's the other way around. If you have more phos acid capacity, you would need more sulfuric acid. In fact, for that, as they import, depending on the price of sulfur. Or you can add sulfuric acid or you can import sulfur and [indiscernible]. So that's the way it is. It just gives the flexibility [indiscernible]. On the logistics challenges, which could happen as you increase your capacity of phos acid.
Okay. And is there any plan to debottleneck or expand that capacity or a complex side, NPK?
So we're already doing that. We are looking at our line, looking at how we can make them more efficient and we've been quite successful at that. So we continue to do that as part of our project at all our 3 plants and looking at how we can get a better throughput through all the -- we have 3 lines in [ buyback ], 3 lines in Kakinada and also 1 line in Ennore and we are looking for the expansion on that one. Obviously, a lot will also depend upon the price of raw materials, especially at Kakinada and how much we want to operate.
Okay, sir. Last 2 questions. See, what is our current mix of formulation and technical grade in CPC business? And where do we see this next 3-year time with the kind of new product registered pipeline, and we are continuously introducing new product?
So our technical plants actually supply both the -- we do export in technical plants for the export market. But at the same time, the technical plants are also used for making our formulation. And the whole idea is to increase more and more of our formulated products using our own technical raw materials, including looking at combination projects. So that's how we are looking at it.
Currently, our capacity utilization is 70%. We're also looking at making more -- some of the plants more fungible so that we can then look at making molecules which are making money and where we are more competitive. That's how we're looking at it.
Okay. And continues into the second. See, what is the total contribution of other business like plant growth, nutrient organic menu and retail in overall top line? And what percentage of EBITDA it is operating? And how do we see the growth in that business?
Okay. Coming to specialized nutrition, which includes organic, we are very happy. We are -- continuously, we are having a very strong CAGR growth. We do believe that this business will continue to grow as the farmers get more adopted and with the help of our own sales and agronomics team as people get more adapted to it.
So we are seeing this as the future of the business, and this includes getting into applications like drones. We've already launched for this quarter what is called a liquid fertilizer plant, which will give us both things which can be used for sprays and other things. We are increasing our manufactured volumes in specialized nutrition by upgrading our plant because we want to capture the entire value chain on that count.
So we do see this as a future growth business and will continue to do well. And we have integrated the teams and we are expanding beyond our current markets where we are. So definitely, it's a business for the future, the way we see it.
And you talked about retail. Our retail main emphasis was -- 3 things that happened on retail. While we grow on the top line, our main thing is to continue to promote our own manufactured products across the retail chain. Also have what is called value additions from new categories which are there, but obviously look at products which are making margins.
What we have done this year is to ensure that all stores are getting profitable. We have closed down some loss-making stores. So now 90% of our stores are profitable. We aim to make it 100% before we look at further expansion.
And last would be the good news in retail is we are with the inventory management and credit from our suppliers. We are actually working on what is called a negative working capital. So that's going to be our story of retail.
One thing which we are doing in retail is to see how we can get into more into services and charge value for that. So not make it just product-oriented and [ value-oriented ] but also look at the service model [ entry ]. Thank you.
The next question is from the line of Tejas Sheth from Nippon India AMC.
I have 2 questions. One, on the Crop Protection side. What kind of acquisition are we really looking at? And are we actively looking at any of the acquisitions? And second question is on the export side. How big the crop protection opportunity can be over the next 3 to 5 years?
On the acquisition front, we have been looking at a few opportunities. We'll have to see whether it will certify, and they have to be complementary and synergistic to our existing business. So that effort is on, and we hope we should be able to come up with something in the coming year, provided the [indiscernible].
On the exports front, obviously, there is a very good opportunity across the market. Coromandel has a very balanced presence across the globe, whether it is South America or Africa or Asia. Currently, the primary molecule for us is [indiscernible]. The Crop Protection team has identified a few more molecules, and they are coming up with a proposal to manufacture them. Hopefully, those technicals, along with some of the combinations and global registrations that the team has come up with, should help us expand our presence in the global market. So opportunity there is quite high.
Okay. Your -- on the export side, are we looking at any contract manufacturer on the technical side? Or it will be purely filing our own registrations and selling it under our brand?
Currently, our business model has been manufacturing technicals, holding registrations and selling. The current thought process has gone through a change. Meaning, that we are also open and in discussions for exploring some contract manufacturing opportunities.
Having said that, it's a new line which Coromandel would be getting into. And obviously, it takes a little bit of time because our current model has been purely into technical. So this has to be a different segment within the Crop Protection business itself.
The next question is from the line of Rohan Gupta from Edelweiss Securities.
And congratulations on such a strong set of scenario. Sir, a couple of questions. First is on the recent government subsidy rate. So we have seen that the cost or input cost is likely to remain at the same level, what it was in the previous quarter. And if you can also help with the current quarter phosphatic acid rate, which you have negotiated with. And with the current subsidy rate reviews, which is effective from the current quarter, do you see the prices in the market to the farmers? Or you can see on the [indiscernible] margins?
Yes, I think the good thing the government has done with the -- with obviously, inputs from the industry, they have taken the rate as per March, what were prevalent in the international market as per March.
Now on -- if you have to guess how the raw material prices are going to move up, given the fact that there is a war which is going on and the fact that, obviously, global commodity prices, including agriculture, has done well, it is going to be anyone's guess, right? So won't like the crystal ball ratio, but a couple of things can help to soften prices.
One is, of course, the war in Russia and Ukraine comes to a quick settlement. Secondly, we are putting the pressure -- we are telling the government to use the diplomatic channels to get Iran back into business. That will help prices of certain raw material commodities. And third, the big -- third is here because China was a big supplier of raw materials, not only for fertilizer, but also for crop protection, and what sort of protectionist policies will they have after the season gets over. So that's where we are looking at how the raw material prices are going to go.
As far as the sulfuric -- as far as phos acid is concerned, I believe the key players are still negotiating to come to a fix on the pricing. We, for one, we have diversified our [indiscernible] so for us, it's not a problem. We are covered. So that's how we are, and we'll take it as when it comes, yes. So that's the idea.
[indiscernible] the effective prices of phos acid for us for the quarter?
No, we won't know [indiscernible] prices are firmed up, which I hope with the subsidy getting announced, it should form a band obviously. Yes.
So -- but we don't see that with the government subsidies taking care -- very well taking care all the input price increase?
We have already spoke to you that, obviously, they want to also have a look at pricing. They have already taking imports on prices prevailing as of March. Obviously, the whole mix can [indiscernible] and depending on what the thing is. But the good thing news with the government is, firstly, they have written, given the subsidy till the last date, including -- which is -- which we have to compliment the government for it because it is a huge win for them.
And the second thing, whatever cost increases, if at all, will come or depending on how it is, I'm sure the government will look into it. Yes. So very early for us to comment. Okay.
Sir, second question is on this crop protection. Can you give a breakup of B2B business and exports and the domestic formulation in terms of the [indiscernible]?
Yes. I think our export is nearly 45%, and the rest is split between B2B and formulation.
Sir, what would be the segment further between domestic and formulation, sir?
So I've already told you, export is 45% [indiscernible].
[indiscernible]
Yes, They're split between the two actually.
The next question is from the line of Dhruv Muchhal from HDFC AMC.
Just to correct myself, you mentioned that the PAP capacity currently is about 1,000 tons per day, which is effectively is about [ 0.35 million ton ], and you're planning to increase it to 1,300 tons per day. Is that right?
Yes, the current capacity is about 1,100 tons per day, and we are looking at increasing to 1,300.
Got it. And any further details in terms of what would be the CapEx? And when do you see this expansion happening?
This is mostly debottlenecking, so it would not require any major CapEx. Definitely some amount of CapEx will be required. It has been factored in our business plan for the year. I think, on an average, could be about INR 10 crores, INR 15 crores. That's the type of CapEx...
A lot of this has been taken care in the ACA which we have done. A lot also depends on the raw materials. Throughput also depends on the [indiscernible].
And by when does it happen? I mean is it already largely done or...
We hope to happen as soon as possible.
Okay. So for this full year, largely, we should be running at this 1,300 ton per day capacity?
We hope. We hope it to happen, yes. A lot depends on -- and we are closely monitoring that.
Sorry for my lack of understanding. I'm just trying to understand -- sorry for my lack of understanding, but how does this operate? I mean does this capacity depend upon these kind of raw -- and hence, the expansion also happens? Or it is -- I mean it's a fixed capacity.
[indiscernible] ratio does play a role because we have to balance out.
Okay. So part of this increase is also driven by expectation of [ better upgrades ]?
Sure.
The next question is from the line of S. Ramesh from Nirmal Bang.
Congratulations on your results. [indiscernible]
Mr. Ramesh, the audio is not clear from your line. Please use the handset mode.
Can you hear me now?
Yes.
Yes, better.
Yes. The first part is if you're looking at the phosphoric acid prices in the second half, move between $13, $13, $15, $13. And the subsidy fixed in October was perhaps building in the second quarter price plus some increase. So I would like to understand how you managed to achieve the kind of growth you have shown in the Nutrient segment in the fourth quarter. To what extent is it based on the captive production of asset? And to what extent is it based on the price increase you have taken?
And secondly, what is the kind of volume growth we can expect for the kharif in both Nutrient and Crop Protection, assuming that the monsoon is normal?
Okay. Thanks, Ramesh, for the question. We had earlier indicated that Q4, the reason for the margin expansion is the past utilization of our PA plants. And we were able to capture the value gap between the imported raw material, which is imported PA versus our own manufactured PA. Along with this is the cost controls that have happened and better capacity utilization.
Now coming to where we are expecting both these businesses in the current quarter. We are expecting normal season given the fact that the prediction is for normal monsoon. [ The real levels ] are good, soil moisture conditions are good. So all of this would mean that we will continue to see good demand. And our aim is obviously to see how we can maximize that. Primarily as well, primary as well as [indiscernible] during the peak season. That is as far as fertilizer is concerned. Given the high prices, we're going to be very selective in terms of the import of finished products in fertilizer.
We're also trying to maximize the SSP production, mainly because there is an increased demand from the farmers as some of them are not able to afford fertilizer at these elevated prices. So the government has given a high level of subsidy. So we'll also see a good growth in SSP.
On the Crop Protection front, again, we are looking at pretty high double-digit growth in the higher teens. As we mentioned, the capacity utilization of the technical plant is key, and 4 new products are getting launched in June. Last year, we launched 6 products. Year before, another 4. So I think the new products into our portfolio is actually filling the gap, and they are also margin accretive. So it's going to be helpful in terms of not only the revenue growth, but also improving the margins in the Crop Protection business.
So as a follow-up, can you give us the volume growth in the Crop Protection business for the fourth quarter? [ We have been talking ], but if you can get us between volume growth and how much has come from increase in prices?
I can come back to you on this. I don't have the numbers by today. But again, we can take it offline, if you don't mind.
The next question is from the line of Abhijit Akella from Kotak Securities.
Congratulations on a great quarter. Just had a couple of clarifications regarding the phosphoric acid segment. So one is, just wanted to understand a little bit more clearly for myself how much our annual requirement of acid is, how much we are currently producing and where we expect to go to over the next foreseeable future?
Okay. Abhijit, our total requirement in Vizag and Ennore is fully met with the production in these facilities, right? The capacity in Vizag is about 4 lakh 10,000 tons. And this will also mean that there is some excess acid that is available for shipment to Kakinada, which we've been doing. Ennore has the capacity of about 60,000 to 70,000 tons of PA, which primarily is used captive into our facility.
With the 2 plants in Vizag and then Ennore, the requirement for imports this year could be anywhere between 3.5 to 4 lakh tons, in terms of input. Again, the product mix will play a very important role because there are certain products which can consume a very high level of PA vis-à-vis others. So depending on that, the requirement for Kakinada could vary between 2.5 to 4 lakh tons.
Okay. Understood. That's very clear. And the second question I just had was on the value gap between imported acid and own manufactured acid. So do you expect this to persist over a long period of time? Or would you see this as some kind of cyclical up move, which could correct at some point in the future?
There will always be a value gap between manufactured and imported acid, right? But the quantum would vary depending on the prices. Currently, PA prices are at very elevated levels. And we've also seen the rock prices going up. However, when you buy the rock and then you manufacture it, the value gap goes up, right? When the PA prices settle down, the raw material prices also will come down. At that time, we will see the value gap coming down. So I think it's a function of PA as well as rock prices and also, to some extent, the subsidiary [indiscernible] prices. Currently, the PA gap is high. In a normal period, I would be expect it to normalize.
Okay. But sorry, just one last clarification on this. Would we expect phosphoric acid to remain relatively tight in supply compared to phosphate rock over the medium to longer term?
See, phosphoric acid, there are currently a few suppliers who are there, unless new capacity comes up, which I'm sure will come up, while rock sources are a lot more diverse. So you need to then set up a phosphoric acid plant to use it. So it's a lot more diverse. And one good thing is, thanks to our [indiscernible] plant, we have the ability to use various type of rocks and various type of acid.
The next question is from the line of Sumant Kumar from Motilal Oswal.
So my question is regarding if there is a further price increase in phos and ammonia, so will government is going to give additional subsidy? Or we are -- government will give us power to increase the price of NPK and DAP?
I think there will be a -- we can't say what the government will do. The government has been helpful. You can see the subsidy prices, this has been fixed up till for kharif season. So that's where they are. Now of course, a lot will depend on how the prices behave. But what the government is looking from their side is to get long-term contracts with all manufacturers and suppliers so as to ensure availability. The key thing is to ensure availability of fertilizer during the current kharif season. And we'll have to take how it comes. So they are monitoring that closely.
No, but if there will be a price increase in phosphoric acid, are we going to issue the price?
The prices will vary from -- it depends on thing. It's not just price of [ phosphate ], it's price of ammonia, price of sulfuric acid, a lot of other things. So a lot of numbers of factors will play. So we can't say just on one particular price, what's going to be and how it's going to be. It's also a question of demand and supply in the international markets.
Government has restricted to increase the price in the past. If the price increases from here, so we have seen in FY '22 government has given additional subsidies apart from all the prices have been fixed. So do you think the government will give additional subsidies?
Working -- government will look at the workings, which is up till March. And there are other factors which will also play, how is the ForEx behaving, how are the other things behaving. So it's not just one, yes.
Okay. The next question is for the technical -- our overall crop protection export side. We have seen -- we are struggling with the new product, and we are still the higher sales of demand projects. Newer product development and sales is becoming a challenging for Coromandel. And there is a huge opportunity in the technical side. So what are the challenges we have seen R&D side that we are trying to fix up? And we are going to have a more molecule available to the market?
So Sumant, as we mentioned earlier, the business has identified a long list of patented molecules. Then based on the feasibility, technical feasibility, based on the scale of commercialization, we have shortlisted the molecules which can be taken up for technical manufacturing. So the R&D team is very well-equipped to work out the processes and ensure it's piloted and scaled up.
Now key for all of this is also going to be the backward integration. So just to do the technical without having copper and minus 1 and minus 2 levels also tied up, mostly I'll prefer it to be in our own plants rather than depending on some sources from other countries. So that process is going on. We don't see any constraint on the R&D front. We don't see a constraint on the capital allocation. We don't see a constraint in terms of the ability of the manufacturing team to scale up.
I think the business case for some of these molecules has been worked out. And as we are mentioning just in a couple of questions before, the proposal for multipurpose plant has been put up by the business for evaluation. And once it is cleared, work will start, and we'll have a new technical role coming up in the plant.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Yes. Thanks, everyone, for attending. I think when we look at how the business is, first, as far as agriculture is concerned, the good thing is that demand continues to be good, both at the global level and also at the Indian level, and agriculture as an economy has done well. And Coromandel is well placed to take advantage of that. So that's a positive side.
Obviously, like most industries are also facing, it's an issue of -- on the higher raw material cost is the availability and then the pricing. But I think a number of steps which we have taken in the past and also the steps that we are planning to do, including the current CapEx such as in line, is a step in this direction to ensure that, firstly, we make fertilizer and agri inputs available to the farmers as they want it and also supporting. We're also hoping that over the years, India will become like it's done for urea, at least from the NPK side, we would get some PLI scheme. The investments can happen so that we are less dependent at least or capture the value back while we are -- for manufacturing while where we are here.
So these are testing times, but I think Coromandel, as a company, we are quite resilient. We've also started a journey of digital transformation, where we hope to look at efficiencies and real-time data, both to benefit the farmers but also look at how we can improve our efficiencies and also look at new opportunities for growth.
Our balance sheets are strong enough. If there's any good opportunity which will come our way, we'll also look at it on an organic growth. So thank you very much for supporting Coromandel. Thanks.
Thank you, all.
Thank you, all.
Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Pvt Ltd., that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.