Volume intact in Q3; hope to maintain margin at 8-9%: Zuari Agro

Sonia: Tell us about the total income, what is the revenue breakup in the fertiliser business between urea and Nitrogen, Phosphorus and Potassium (NPK) and what is the expectation going ahead?

A: You mentioned in your opening remarks that our sales has come down but volumes are intact because the price level have been lower this year due to international market moving down. The gas prices also have been low and that has net reduction in our subsidy revenue from the government for the urea business and that's the reason for this but the raw material price corrections have also been good and some aggressive buying positions that we had taken has lead to this big jump in our profit margin. However, our EBITDA margin has moved up to about 9 percent and that is what we are happy about otherwise overall the market has remained subdued during the quarter also as well as for the year for nine months also. The overall sales for fertilisers are down by about 5.5 percent reflecting that there was a rundown on the pipeline inventory with distribution channel despite seasonal factors especially kharif being very good but in rabi - the seasonal factors in Karnataka and Tamil Nadu have been pretty low, the rainfall has been low and water level in the reservoirs also not so good but other states have continue to do well and that's the reason that we have improved on our performance.

Latha: Can your margins be sustained at current levels of 9 percent, as you say it has been a dramatic improvement and will the intake, the revenue continue to be lower or off take continue to be lower in Q4 as well?

A: Generally Q4 is an offseason quarter but we expect that with pre placement and early buying by the trade, will maintain our volumes. As far as price levels are concerned, for January-March quarter we expect them to remain at about same levels but international market has started moving up. So going forward we should see some improvement in the price levels and our revenues etc but as far as EBITDA margins are concerned, 8-9 percent is a healthy margin for this business and we hope that that margin level will be maintained going forward until and unless there are some major disruptions in the market.

Sonia: What is the debt situation currently? Has there been any repayment and what is the working capital situation now?

A: Our borrowings which are short-term in nature have come down from Rs 3,747 core at the beginning of March to around Rs 2,651 crore as of end of December, so there is an improvement on that as well as subsidy levels are also low, from Rs 1,711 crore as end of March this year, we are down to Rs 1,170 crore by end of December, so there is an improvement. However, we expect further improvement going forward because government for the first time has announced a special banking arrangement for the domestic producers only, both urea as well as complex fertiliser manufacturers, so that's the first time that the government's recognition that domestic industry in order to sustain its production levels for all the 12 months, need some special consideration. So we are happy about this development and this will further reduce our subsidy dues as well as borrowing levels going forward.