Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue grew by 23% year-on-year to INR 785 crores.
- Agrochemical business increased by 43% year-on-year to INR 679 crores.
- Gross margin improved to 29.2% in Q1 FY 25 from 8.7% in Q1 FY 24.
- EBITDA for the quarter stood at INR 88 crores with an EBITDA margin of 11.3%, compared to a loss of INR 66 crores in Q1 FY 24.
- The company remains net debt-free with cash and liquid investments of INR 624 crores as of June 30, 2024.
Negative Points
- Non-agrochemical business decreased by 35% year-on-year to INR 106 crores.
- Other expenses saw a sharp increase, driven by legal and professional fees and foreign exchange losses.
- Inventory days increased from 85 days to 103 days year-on-year.
- Despite volume growth, margins in the eye care business remained low due to pricing pressures.
- High trade receivables remain a concern, although they have improved from the previous quarter.
Q & A Highlights
Highlights of Sharda Cropchem Ltd (BOM:538666, Financial) Q1 FY25 Earnings Call
Q: Can you provide some color on the inventory levels and whether they are at normal cycle levels?
A: Inventory levels are slightly below normal. It's difficult to provide exact figures as there are many manufacturers globally, but the inventory in the channel is still being consumed and operations are moving towards normalcy. (Ramprakash Bubna, Executive Chairman)
Q: Despite healthy growth in sales, why are EBIT margins still low? Was there any one-off or further inventory provision?
A: Margins are affected by the price levels of products. Some products are still being sold at significantly lower prices compared to last year. The company had to bear heavy losses due to market price devaluation. (Ramprakash Bubna, Executive Chairman)
Q: What is driving the sharp increase in other expenses?
A: The increase in other expenses is mainly due to legal and professional fees and foreign exchange losses. There was an FX loss of 8.31 crores this quarter compared to a gain of 9.5 crores in Q1 last year. (Shailesh Mehendale, CFO)
Q: Can you elaborate on the growth triggers for the non-agrochemical side?
A: The non-agrochemical business has not yet recovered in volumes due to high freight rates and logistical disturbances. However, we are optimistic about future improvements. (Ramprakash Bubna, Executive Chairman)
Q: Are you seeing any improvement in agrochemical prices, or is it an anticipation?
A: Prices will improve when demand exceeds supply. Currently, demand and supply are matching, and companies are focused on maintaining market share rather than margins. We expect gradual improvement. (Ramprakash Bubna, Executive Chairman)
Q: What is the outlook for CapEx and its impact on growth?
A: We have been spending around 400 to 420 crores annually on CapEx for the last few years. This is expected to continue at similar levels, driven by the need for product registrations and market expansion. (Ramprakash Bubna, Executive Chairman)
Q: How do you see the trend of trade receivables, and is there any risk associated with high trade receivables?
A: Trade receivables have improved from 192 days in Q4 to 132 days in Q1. This is a normal trend due to the seasonal nature of our business, and we do not see any significant risk. (Ramprakash Bubna, Executive Chairman)
Q: Can you provide an outlook for FY25 and FY26 in terms of sales and EBITDA?
A: We expect revenue and EBITDA to grow by 15% to 18% in FY25. It is difficult to provide a precise outlook for FY26 due to changing market conditions. (Ramprakash Bubna, Executive Chairman)
Q: What is the contribution of the top 10 molecules to total revenue, and how has this changed over the years?
A: The top 10 molecules contribute about 35% to 40% of total revenue. The list of top molecules changes every year based on market demand and conditions. (Ramprakash Bubna, Executive Chairman)
Q: How do you see the non-agrochemical segment shaping up in the next 3-5 years?
A: We are optimistic about the non-agrochemical segment. Last year, it provided better margins than the agrochemical business and supported overall revenue and profitability. (Ramprakash Bubna, Executive Chairman)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
