India: Not a bad year for agri input companies
Dec. 28, 2018
Promise of higher MSP (Minimum Support Price) from the Centre in the Budget saw agri input companies stepping into 2018 cheerfully, but it ultimately turned into a damp squib. With no thrust on procurement, higher MSP was a promise written in water. Mandi price of crops including paddy, maize, moong, urad and tur dropped below MSP in the Kharif. In the first quarter of the calendar year — January to March — long dry spells resulted in low pest infestations, hurting business for agro-chemical companies. The April-September period which coincides with the South-West monsoon, was not any good either. Monsoon rains were below normal (9 per cent below LPA) and sowing in many crops dropped compared to the previous year.
However, it was not a very bad year for the agri sector. Players in the irrigation systems and fertilisers space saw double-digit growth.
Jain Irrigation, which makes irrigation systems, saw a 23 per cent increase in revenue for the period January-September, over the same period in the previous year helped by low water level across parts of the country. Profits for the period were up by a healthy 43.5 per cent for the company. Fertiliser companies reported a strong revenue growth thanks to strong demand for phosphatic fertilisers.
For Coromandel International, sales growth was 21 per cent in the first nine months of the calendar year. Its peer Deepak Fertilisers saw an even stronger 62 per cent sales growth in the period, y-o-y. The duo, however, couldn’t record profit growth due to higher price of inputs such as phosphoric acid and ammonia and the time lag in passing it on to customers through new MRP. Deepak Fertilisers reported a 13 per cent drop in PAT while Coromandel International recorded a 3 per cent drop in profits during the nine-month period.
Players in the crop protection space — Rallis India, UPL and Insecticides India — reported a 16 per cent, 10 per cent and 6 per cent revenue growth respectively in the period (nine months of 2018). Lower-than-usual rains and long dry spells checked spread of pest attack. However, new product launches and increased export sales to Europe and Latin American markets in the April-September period, helped. There was margin pressure due to higher fuel costs and increase in price of input chemicals, but companies tried to manage with price hikes and by pushing sales of value-added formulations.
On the seeds front, Kaveri Seeds, reported flat sales on the back of drop in both volumes and price in cotton. Though the non-cotton business caught on, it couldn’t make up for loss in the cotton business.
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