Rallis India has reported a weak set of earnings with net sales down 2.8 percent year on year. Discussing the results, MD & CEO V Shankar said the company has performed well despite tough environment and unusual events.
According to him, unusual monsoon and Brazilian currency depreciation have impacted the company’s performance. However, Rallis India expects robust growth in both seeds & crop protection segments going ahead.
Below is the transcript of V Shankar’s interview with Surabhi Upadhyay on CNBC-TV18.Q: What happened, what went wrong in the last quarter which led to sales performing in the manner in which they did? A: When you look at the numbers, the sales have been a bit muted for the quarter. We have done Rs 315 crore against Rs 324 crore of the previous year. Our profits in fact rose by about 10 percent to Rs 21 crore. I think what is more of significance since we focus on that quality of operations, our EBITDA margin improved by 120 basis points to 14.1 percent and this is a reflection of not only the new products we have introduced but the right product mix as well as the programs which we have on value creation within the company. So, those programs beginning to kick-in. We also had good performance done on the seed side so overall the seeds business has also done well. When you look at year as a whole, overall the year faced several challenges. Both kharif and rabi back-to-back had monsoon performance which were not conducive for good farming operations which affected crop acreages, crop yields and furthermore the crop commodity prices were also down affecting farm incomes.
There were also cash pressures in the marketplace because of realisation as well as the urea shortage put a lot of pressure on cash flows in the marketplace. As if this was not enough, when crops were ready for harvest particularly in the last month and even as recent as day before yesterday we saw unseasonal rains affecting crops across beginning from fruits, grapes, mangoes, pulses, wheat and corn across various states really adding to the plight of the farmers. So, all-in-all we have faced a number of very unusual events one stacking up on the other from an India perspective.This year even on the global side, Brazil, which is one of the biggest markets for agro-chemicals, faced weather situations like unprecedented drought. With the depreciation of the Real created lot of pressure around agriculture in terms of the cost of farming inputs and therefore brought in a very different kind of challenge.
Q: I take your point that the weather is something which is beyond control but the fact is that the weather gods are still not smiling upon us. You have seen this de-growth in the previous quarter though profitability seems to be better off. What is your outlook, how do you look at growth in the coming few quarters and months?
A: Profits for FY15 has been about 4 percent higher than the previous year. However, what is notable is that Metahelix Life Sciences which is our seeds part of the business, our growth on the topline was close to 40 percent to cross Rs 300 crore and bottomline the PAT went up by almost 80 percent from Rs 9 crore to almost Rs 17 crore. Going forward, important thing is we had a drought year last year and this year it is going to be important on how the monsoon pans out. We have had different forecasts including the recent one from the Indian Metrological Department (IMD) which don’t say the same thing. Therefore, what actually happens is important. One is the statistical average which is what these numbers say but is extremely important for agriculture and particularly for kharif is the onset of the monsoon which has to be on time and then the Spatial and Temporal distribution as farming happens. That is going to be very crucial which was very different last year which affected as I said the crop acreages and crop yields; that is going to be very important. So, we hope and pray that it is not another drought year and it is a good year from a monsoon perspective. This year that is going to be very important for the farmers and for sentiments to perk up and for the country. From an industry perspective and from Rallis India perspective, underlying agri inputs are very critical to driving up agriculture production and productivity. I think that continues. The pressure on farm labour, availability of labour, etc continues and therefore there is immense scope for categories like weedicides, herbicides which help the farmers in dealing with unwanted plants growing along with the crop and therefore that is going to be an important growth area. Going forward there will be robust growth whether it is on the seed side or crop protection side. Certainly Rallis is well poised to take these opportunities forward and work with the Indian farmers to drive up the agricultural productivity. We have new set of solutions and that has been one of the success factors of FY15. Both on the seeds and crop protection areas we have given new solutions and products and our pipeline is quite rich and we will continue to do so. Q: Margins did improve by around 30 basis points and you have ended the year at around 15 percent. Do you expect to better that; can we actually see an improvement? A: Yes you are right. Even in this tough year we have improved our year’s EBITDA margin by 30 basis points. Certainly our intent is that our EBITDA margin should be in the band anywhere between 15 and 18 percent. So, certainly we will work towards improving the EBITDA margin by maybe 100-200 basis points; that is the intent.
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