Sabero to regain normal profitability soon, says Coromandel

Kapil Mehan, managing director of Coromandel International, says that the proper regulatory permissions for increasing Sabero’s capacity is in place, so the company will go back to its normal profitability in a few quarters.
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Home » News » Business

Dec 22, 2011, 03.51 PM | Source: CNBC-TV18

Sabero to regain normal profitability soon, says Coromandel

Kapil Mehan, managing director of Coromandel International, says that the proper regulatory permissions for increasing Sabero’s capacity is in place, so the company will go back to its normal profitability in a few quarters.

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Sabero to regain normal profitability soon, says Coromandel

Kapil Mehan, managing director of Coromandel International, says that the proper regulatory permissions for increasing Sabero’s capacity is in place, so the company will go back to its normal profitability in a few quarters.

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Kapil Mehan (more)

MD, Zuari Agro Chemicals |

Coromandel International recently completed the acquisition of Sabero Organics , a maker of insecticides. Speaking to CNBC-TV18, Kapil Mehan, managing director of Coromandel International , says that the proper regulatory permissions for increasing Sabero’s capacity is in place, so the company will go back to its normal profitability in a matter of a few quarters.

“Currently, Sabero’s capacity utilization stands at around 30-35%, but it should increase to 40-50%, increasing our production and sales,” he said. He further adds that they will look at increasing the company’s export percentage.

Below is an edited transcript of his interview with Reema Tendulkar and Ekta Batra. Also watch the accompanying video.

Q: Can you take us through what the financials are looking like for Sabero Organics? Also, once you are consolidated into Coromandel, what will be the picture in terms of margins as well as the bottomline?

A: As far as Sabero financials is concerned, we have moved into management of the company as of 19th December only. The company made a loss in the first two quarters because regulatory permissions which were not in place to produce full quantity. But we have now the permission to produce more, so the company will come back to its normal profitability over the next few quarters. From there onwards, we should look forward to better times.

Also read: Moody's sees fisc deficit at 6%; structural issues in India

Q: Sabero’s utilization was only at about 30-35%. What is the kind of improvement the acquisition will do on a consolidated basis? Also, can the EBITDA margins go back to the historical levels of about 14-15%?

A: I can only reflect on what margins that we have in our business as well as what we expect from Sabero. We expect that the capacity utilization level should go up from this level of 25-30% to maybe 40-50% because the permission is in place.

One of our constraints has been the affluent treatment facilities in the plant, which we are augmenting, and over the next four-six months we hope that we will be able to complete all the missing pieces in the manufacturing facility. From that point onwards, our production and sales will increase, because that plant is quite underutilized as of now.

Q: Going forward, you would like to maintain the percentage of exports or would you maintain 55% of sales?

A: One of the strategic reasons for us to acquire Sabero was their international sales as well as the registration that they have across many geographies. We will augment that part of the business with our own technical range. So going forward, I would expect that our export business will ramp up and achieve higher volumes as well sales.

Also, we will utilize Coromandel distribution strength in augmenting the formulations of the business which is falling directly to the farmers, through our own network as well as through a network of our dealers and retailers. So both sides will be progressed aggressively and I expect that this 55% ratio may move up a bit.

Q: Could you tell us on a consolidated basis for Coromandel International what the revenues, margins and profitability perhaps might look like in FY13?

A: We don’t give specific number as a policy but we definitely expect that Sabero also will come up close to what Coromandel has in its portfolio in terms of margins but there will be substantial topline growth.

Q: When could we expect Sabero to break into black on the bottomline?

A: We will have to see over the next two quarters how this company goes up.

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