In an interview to CNBC-TV18, Kapil Mehan, MD & Group CEO of Zuari Agro Chemicals spoke about company's results for this quarter.
Below is the verbatim transcript of Kapil Mehan’s interview with Latha Venkatesh & Sonia Shenoy.
Sonia: Another quarter where you have seen a lot of operational difficulties. When do you expect the trend to turn?
A: If we look at operationally, our performance has been pretty good because our production is up from 2.24 lakh tonne last year to 3.06 lakh tonne. And at the group level, our first half performance is up from 9.28 lakh tonne to 12.5 lakh tonne. So, overall, operationally, it has been a good quarter, but for Zuari, we had headwinds in terms of rupee depreciation impact that we were not able to pass on to the market and that has led to this decline by about Rs 8 crore as far as our earnings before interest, taxes, depreciation and amortisation (EBITDA) margin is concerned. But, our EBITDA margin actually improved from 5.7 percent to 6.04 percent.
The major reason for a drop in our profit before tax (PBT) and profit after tax (PAT) has been primarily because of the financing costs continuing to remain high and that is a result of subsidies getting delayed, under-provisioning of subsidies. So, those are the reasons which are really at the government level that our performance at the PAT level and PBT level is not looking great.
Latha: Was high inventory cost any reason for your higher raw material costs because otherwise, fuel costs, for instance, have gone down and generally, for most sectors, material costs have actually gone down, any chance that it will be better in the second half?
A: The second half will be better because we do three to six months contracts for supplies and most of our raw materials are imported raw materials. However, when the rupee depreciates during a quarter, which it did, as compared to first quarter to second quarter, there was a depreciation of about 1.50/USD and that has a major impact on our cost structure as well as on the absolute margins and that has impacted our results. But, second half, the prices will get reset and we are seeing softening of prices of some of our raw materials and that is something that will reflect in the second half performance.
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