Zuari Agro posts net loss in Q4; Morocco's OCP Group to invest $46.5M in ZFL

The fertilizer company Zuari Agro Chemicals traded on a negative note during Monday's trading session after the company announced a consolidated net loss of Rs304.60cr for the March 2020 (Q4FY20) quarter. The latest Q4 net loss has widened from a year ago same period where the loss stood at Rs255.17cr.

The top-line also witnessed a downward trend with total income coming at Rs1,031.93cr in the quarter as against Rs2,001.30cr in the corresponding period of the previous year.

In its financial audit report, Zuari Agro said, "Due to significant delays in receipt of subsidy from the Government of India in earlier periods, a drought-like situation in our key marketing area in earlier periods there was a consequent deterioration of the Company's liquidity position, which led to elongation of the working capital cycle of our Company."

Also, Zuari was not able to pass on the increase in the prices of the raw materials to the farmers which contributed to the cash flow mismatch and reduced financial flexibility of the company, on account of which, it has a  net current liability position of Rs1,506.22cr as of March 2020.

These factors, Zuari informed, "adversely impacted company's cash flow, debt positions, delay in repayment of loans on the contractual maturity date, recall of loans from two lenders due to non-meeting of a covenant breach, the downgrading of their rating to (ICRA) D and prolonged shut down of its plants for different periods during the year."

On Covid-19 impact, Zuari Agro said, "The agriculture and fertilizer sector remain relatively unaffected on the demand side, the Company's operation has not been affected significantly on account of COVID-19 despite some issues relating to non-availability of labour and supply chain disruptions."

In its meeting held on Sunday, the company's board gave in-principle approval for the sale of the fertilizer plant at Goa to Paradeep Phosphates Limited (PPL). After the year-end, the Morocco-based OCP Group expressed an interest to invest in Zuari Farmhub Limited (ZFL) of $46.5M in ZFL, subject to the completion of confirmatory due diligence by OCP. The Company has accepted the offer.

Currently, the company and OCP hold 50% each of the total equity capital of Zuari Maroc Phosphates Private Limited (ZMPPL) and ZMPPL holds 80.45 % of the Share capital of PPL.

Apart from this, the company has announced waiver of recovery of excess remuneration paid to Sunil Shetty, Managing Director for the financial year FY20 subject to further regulatory approvals.