Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sharda Cropchem Ltd (BOM:538666, Financial) reported a 47% year-on-year revenue growth in Q3 FY25, reaching INR929 crores.
- The company's agrochemical segment saw a significant volume growth of 50% year-on-year.
- Gross margins improved by 660 basis points to 32.7%, attributed to stabilizing raw material prices.
- EBITDA for the quarter increased by 232% year-on-year, reaching INR157 crores.
- The company remains net debt-free with cash, bank, and liquid investments totaling INR742 crores as of December 31, 2024.
Negative Points
- The PAT margin decreased from 5.41% in Q2 to 3.34% in Q3, primarily due to foreign exchange losses.
- The non-agrochemical business experienced a 4% year-on-year decrease in revenue over the nine months of FY25.
- There is a concern about competitive intensity from Chinese players entering the market.
- The depreciation and amortization charges significantly impacted the segmental EBIT for the agrochemical business.
- The company faces challenges in maintaining high margins due to slow improvement in pricing and persistent competition.
Q & A Highlights
Q: In the Agrochem business, what growth was the outperformance in terms of volume growth for us in Europe and North America? How did we gain market share, and is there any risk of sales return in Q4?
A: (Ramprakash Bubna, Executive Chairman) The market share gain is from the market in general, not specific competitors. We don't see any risk of goods being returned; it's a normal sale.
Q: Are you seeing any competitive intensity from Chinese players in the market?
A: (Ramprakash Bubna, Executive Chairman) No, we are not seeing significant competition from Chinese players at this stage.
Q: The Agrochemicals segment EBIT margins seem low. Can you explain why?
A: (Ramprakash Bubna, Executive Chairman) The EBIT margin is not 1% as suggested; it's closer to 15.9% for the quarter. The segment results include depreciation and amortization, which affects the reported figures.
Q: Can you provide guidance on EBITDA margins for FY25, given the current performance?
A: (Ramprakash Bubna, Executive Chairman) We are confident of achieving our EBITDA margin guidance of 15% to 18% for FY25, despite the first two quarters not performing as well.
Q: How is the pricing trend for agrochemicals, and what is the customer feedback?
A: (Ramprakash Bubna, Executive Chairman) There is a gradual improvement in prices, but the competition is still strong, which limits significant price increases.
Q: What is driving the growth in the non-agrochemical market, and what are the sustainable margins?
A: (Ramprakash Bubna, Executive Chairman) Growth is driven by good customer relationships, satisfaction, and timely deliveries. We are confident that the current margin levels will continue.
Q: How do you manage foreign exchange losses, and what is the outlook for the next quarter?
A: (Ramprakash Bubna, Executive Chairman) The losses are due to euro depreciation against the dollar. We hedge nominally and have a natural hedge with our sourcing in US dollars. If the euro strengthens, it will benefit us.
Q: What is the outlook for achieving INR4,000 crores in revenue, and how will it affect profitability?
A: (Ramprakash Bubna, Executive Chairman) We aim to reach INR4,000 crores this year, and we expect the top line to grow with volume and price increases, maintaining profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
