Agro chemical firm United Phosphorus has guided for a 12-15 percent revenue growth in FY14 despite uncertainty about good monsoon this year. The generic crop protection, chemicals and seeds company had reported 17 percent year-on-year jump in income from operation to Rs 9,194.52 crore during the year gone by and is confident of sustaining growth this year too.
In an interview with CNBC-TV18, Arun Ashar, director, finance at United Phosphorus said that despite drought situation in the US and in India in FY13, the firm reported robust growth in sales boosted by higher exports in Latin and North America and Europe.
This year, the firm is betting big on organic growth route and is hopeful of improving margins by 100 basis points.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: You have guided for a 12-15 percent revenue growth in FY14. If this year turns out to be a normal monsoon as has been predicted so far compared to the fact that in FY13 we saw a drought situation in US, India as well saw some scanty rainfall then what could be the upside to your FY14 guidance?
A: The guidance that we have given is purely organic. Last year we had grown by 20 percent in spite of drought in US and India.
Q: How do you see your exports panning out?
A: Last year’12-13 the Latin America contributed about 27 percent of the revenue and there was a growth of about 28 percent. North America had growth of 31 percent and 20 percent revenue came from there. India had delayed monsoon, so growth was only 5 percent. 19 percent of the total revenue came from India.
Q: You are expecting some margin improvement as well in FY14. How much could it be? What is it predicated on?
A: Expect margin improvement by over 100 bps in gross margins. Last year we had improved our gross margin by 2 percentage points from 37 to 39 percent so this year we are expecting around 1 percent improvement.
Q: What is the margin improvement predicated on?
A: It is predicated mainly on better realizations. Last year the price realization was helped by export returns and the volume had also gone up by 5 percent. This year we have not taken any neutral exchange return, but mainly on price account and little bit of volume.
Q: There are some concerns related to the piling of debt. Are there any debt reduction plans going forward? Is there anything that you could take us through?
A: We have no specific debt reduction plans.
Q: What about your working capital cycle?
A: There was lot of improvement in working capital cycle last year. It has gone down to 89 days from about 108 days. So there was a considerable improvement in net working capital last year.