Coromandel International, Energy

 Coromandel International, Energy

Coromandel International

Coromandel International

Coromandel Intl Q2 cons net profit slips 20%

Coromandel International has announced the following results for the quarter ended September 30, 2011:

Standalone Results

The net profit of the company fell by 20.35% to Rs 278.82 crore for the quarter ended September 30, 2011 as compared to Rs350.10 crore for the quarter ended September 30, 2010.

Total Income has advanced by 0.62% to Rs2811.47 crore for the quarter ended September 30, 2011 Rs2793.99 crore for the quarter ended September 30, 2010.

Consolidated Results

The net profit of the company dipped by 19.81% to Rs282.38 crore for the quarter ended September 30, 2011 as compared to Rs352.17 crore for the quarter ended September 30, 2010.

Total Income has jumped by 0.72% to Rs2816.63 crore for the quarter ended September 30, 2011 Rs2796.31 crore for the quarter ended September 30, 2010.

Coromandel International

Coromandel International

Coromandel Intl Q1 cons net profit rises 32%

Coromandel International Ltd has announced the following results for the quarter ended June 30, 2011:

Standalone Results

The Unaudited results for the Quarter ended June 30, 2011

The net profit of the company surged by 31.21% to Rs159.35 crore for the quarter ended June 30, 2011 as compared to Rs121.45 crore for the quarter ended June 30, 2010.
The total income of the company increased by 15.32% to Rs1814.75 crore for the quarter ended June 30, 2011 from Rs1573.60 crore for the quarter ended June 30, 2010.

Consolidated Results

The Unaudited consolidated results for the Quarter ended June 30, 2011

The net profit of the group advanced by 32.34% to Rs158.89 crore for the quarter ended June 30, 2011 as compared to Rs120.06 crore for the quarter ended June 30, 2010.
The total income of the group increased by 15.28% to Rs1814.94 crore for the quarter ended June 30, 2011 from Rs1574.42 crore for the quarter ended June 30, 2010

At 3.17 pm, the stock was trading at Rs329.80, down by 1.20%, with a volume of 0.65 lakh shares on the BSE.

Coromandel International

Coromandel International

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Coromandel International

Coromandel International

Coromandel International

Coromandel International

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Coromandel International

Despite a more than four-fold gain from its 2009 lows, the stock of Coromandel International (Coromandel) remains a good exposure for investors with a three-year perspective.

The company's adept handling of the ups and downs of the commodity cycle underline its cost and operational efficiencies. Growth prospects appear quite bright in both the fertiliser and agrochemicals business over the next three-five years.

Untapped potential in new businesses such as micronutrients, organic fertilisers and rural retail into which Coromandel has just charted forays also holds promise. At the current market price of Rs 395, the stock trades at a PE of about 10 times its estimated FY-11 earnings. While the stock's historic PE has been lower, higher valuations may be here to stay, with an increasingly friendly policy environment for fertilisers, the company's growth prospects and successful de-risking of operations from cycles.

Market expansion

Coromandel's prospects in its core business of complex/phosphatic fertilisers are underpinned by the big supply deficit in the domestic fertiliser market, which is met by imports. It is these domestic shortages that have helped Indian fertiliser producers register fairly strong volume growth even in the bad monsoon years in recent times. In 2009-10, a drought year, Coromandel's fertiliser sales volumes still grew by 33 per cent.

Increasing pressure to improve foodgrains availability and crop yields is expected to contribute to higher fertiliser use over the medium term. Over a four-five-year span, the market for DAP and complexes alone is estimated to increase from 160 to 200 lakh tonnes. Correcting the imbalance in fertiliser use also requires the government to incentivise DAP and complexes more than urea. Competitive edge

Having added steadily to its capacity through investments and buyouts , Coromandel today operates about 32 lakh tonnes of fertiliser capacity; this is proposed to be expanded to 42 lakh tonnes over the next two-three years at an investment of Rs 300 crore. While marketing this output should not pose a significant problem, it is raw material supply that could be a critical success factor. However, on this count too, the company appears to be making the right strategic moves, by inking overseas pacts and investing in capacity for phosphates and ammonia. These linkages have enabled the company to emerge as one of the low-cost domestic producers of its products.

NBS, more flexibility

Then, the policy environment for fertilisers is also becoming more conducive. Take the transition to the nutrient-based subsidy (NBS) regime, which has taken effect from April 1 this year. With both the selling prices as well as the subsidy elements on decontrolled fertilisers hitherto fixed by the government, the cost or procurement efficiencies of individual players did not make a material difference to their competitive position. That is set to change now. Subsidies for fertilisers too were based on the product and not on the nutrient content, placing products such as urea at an advantage.

With the NBS offering compensation to producers for every kg of N, P or K present in the product, such advantages will be removed. Players such as Coromandel will have vast flexibility to alter their product mix and differentiate its brands to capture market share. In another important move, the government has also allowed marginal leeway to producers to hike selling prices to make up for any under-recovery. While a sizeable increase in fertiliser prices may not be possible, this does allow efficient producers such as Coromandel to enjoy greater pricing flexibility.

In the near term, transition to NBS has meant substantial hikes in the subsidies for several grades of phosphatic and complex fertilisers. Taken with the modest price increases of 6-7 per cent in selling prices taken by producers, players such as Coromandel should see both price and volume driven growth accelerating this fiscal, making up for any raw material increases.

New drivers

Coromandel has also charted forays into several new non-fertiliser businesses that could piggyback on its extensive rural distribution network. The company already markets agrochemical formulations and is building capacity to cater to the growing contract manufacture requirements of players in this market.

It is also investing in the manufacture of micronutrients and organic fertilisers, nascent markets with good potential. The company is investing in a rural retail network, which it plans to use both for procurement of farm products and to deliver consumer goods.

Coromandel has managed an impressive scaling up of its sales and profits over the last five years, helped partly by inorganic growth. While its sales expanded at 32 per cent compounded annually, net profits have risen at an impressive 47 per cent.

Given that Coromandel's sales realisations are linked directly to global fertiliser prices, the company did see a blip in its sales, reporting a 33 per cent decline in revenues in 2009-10, over 2008-09. . However, volume growth remained strong. And with raw material prices correcting even more sharply than product prices, Coromandel managed to marginally expand its operating profit margins and close the year with nearly flat profits.

via BL

Coromandel Fertilisers

Concerns about an erratic monsoon have beaten down the valuations of fertiliser stocks significantly in recent trading sessions.

Investors can use this opportunity to buy the Coromandel Fertilisers stock (Rs 183), which offers a bargain, trading at a price earnings of just six times its estimated earnings for 2009-10.

Coromandel Fertilisers’ status as one of the largest and cost-efficient producers of fertilisers and its extensive distribution network suggest that its prospects will not be materially impacted by a single deficit-monsoon season. In fact, despite the erratic monsoon, sales of complex and phosphatic fertilisers have already grown by 55 per cent in April-June 2009. There also remains a 25-per cent deficit in domestic supplies of DAP and complexes.

Coromandel Fertilisers’ businesses span phosphatic and complex fertilisers, pesticides, micro-nutrients and other farm inputs, with a marketing presence in 13 States. A wide fertiliser product mix, overseas buys which have secured supplies of raw materials, and scaling up of capacity through the integration of Godavari Fertilisers have enabled Coromandel to sustain strong growth over the past five years, amid the ups and downs of the agricultural cycle.

The company has managed a 50-per cent compounded annual growth rate in both sales and net profit in the past five years, even as the earnings per share have expanded from Rs 5 to over Rs 30.

The year 2008-09 was particularly challenging for Coromandel with a sharp rise, followed by a crash, in prices of raw materials such as ammonia, phosphoric acid and sulphur, which resulted in a dip in realisations starting the fourth quarter.

The Government’s decision to discharge a part of its subsidy obligations through bonds also contributed to a substantial mark-to-market loss. However, the current year appears less challenging on both counts. With raw material prices stabilising and global fertiliser prices correcting (subsidy is linked to import parity prices), realisations and revenues may dip; but volumes will grow and margins may be maintained. A sharp cut in the Government’s subsidy outgo and assurances that these would be paid mainly as cash, may result in better recoveries and lower working capital requirements for players this year.

Over the medium-term, the policy proposal to move from a product-based subsidy to a nutrient-based one, may serve to wean farmers away from cheaper urea and act as a strong demand driver for players such as Coromandel.

Coromandel Fertilisers

Coromandel Fertilisers

Coromandel Fertilisers

Coromandel Fertilisers

Coromandel Fertilisers

The strong uptrend in farm product prices, mounting pressure to expand farm output and yield and expanding government outlays on agriculture, are all likely to stoke demand for agri-inputs such as fertilisers and crop protection products over the next few years.

The policy environment for domestic fertiliser makers is also likely to turn more conducive in this backdrop. However, the stock may deliver only over a 2-3 year time frame, as the company’s cost and sourcing advantages may pay off only over the medium term. Near-term financials, especially for the March quarter, may be muted as one of the units had temporarily suspended production during this period.

Coromandel Fertilisers, one of India’s leading makers of phosphatic and complex fertilisers, has the scale and distribution reach to capitalise on this trend. The company has managed an annualised growth of 15 per cent in its sales and 32 per cent in net profit over the past five years helped by capex and acquisitions, despite limited pricing power and an unfriendly policy environment. The stock, trading at about eight times its estimated earnings for the current year, at its market price of Rs 117, appears to be a value ‘buy’ in this context.

Starting out as a South-based producer of phosphatic and complex fertilisers and pesticides, Coromandel Fertilisers has acquired significant scale and a pan-India presence through a series of acquisitions. The company’s acquisition of EID Parry’s farm inputs division, phosphate producer — Godavari Fertilisers — and pesticide maker — Ficom Organics — have added manufacturing facilities that are well spread-out to reduce logistics costs and an extensive distribution network for agri-inputs. These have been leveraged to market a wide range of farm inputs spanning fertilisers, crop protection products and micro-nutrients across India.
Scale and diversity

In the fertiliser business, the company is India’s second largest phosphate producers, controlling capacities of close to 2.5 million tonnes; this is proposed to be enhanced to 3.3 million tonnes by 2009. Economies of scale allow considerable flexibility and diversity in CFL’s product mix between DAP and various grades of NPK complex fertilisers (12:32:16, 20:20, 10:26:26 and 28:28). CFL’s earnings growth in fertilisers is determined mainly by volumes and product mix changes. Current selling prices are well below production costs, with producers reimbursed for the shortfall through a “concession” (subsidy) determined on the basis of “normative” conversion costs and prices of imported inputs.
Strategic sourcing

Though this subsidy regime allows eventual pass-through of major input costs (significant when international prices of sulphur and phosphoric acid have risen 9 and 3 times respectively in a year), late recoveries and under recoveries do tend to exert pressure on the liquidity of domestic manufacturers. CFL, on its part, has made several strategic moves over the past five years to optimise its cost structure. It has secured sourcing of key raw materials such as rock phosphate by acquiring stakes in large global suppliers such as Foskor.

A JV to produce Phosphoric acid has also been flagged off with Groupe Chimique Tunisien. CFL has also acquired, turned around and expanded capacities at Godavari Fertilisers to attain considerable scale; it has also worked with a flexible product mix to take best advantage of the subsidy regime. The company’s cost structure is now among the lowest in the phosphatic/complexes space, which makes it well-placed to compete with imported fertilisers.
Favourable twist to policy

Domestic demand for complex fertilisers has been strong over the past three years, on the back of stable prices (fixed by the government) and expanding irrigated area, with the Southern market registering the strongest demand growth. Supplies in the domestic market have been extremely tight as investments in new capacity have not kept pace with demand. Bridging the deficit through imports has become an expensive proposition with global fertiliser prices soaring more than two-fold in the past year.

In this backdrop, the policy on the subsidy and pricing of phosphatic and complex fertilisers is likely to turn more favourable in the years ahead. Implementation of the Abhijit Sen committee recommendations (which proposes pricing and subsidy based on landed cost of imported DAP ) could translate into better margins for low cost, integrated producers such as CFL; it will also make the policy regime more stable and transparent. CFL will also benefit from any transition to nutrient-based subsidies, as this will ensure better offtake of phosphatic fertilisers, relative to urea.

The recent spiral in global fertiliser prices has ensured that landed costs of imported products are well above production costs for efficient domestic producers such as CFL, allowing them a substantial margin of comfort. CFL’s other products offerings within agri-inputs — crop protection and micro nutrients — also offer growth potential. Low-cost manufacture makes CFL a supplier of choice for generic agrochemicals, while micro-nutrients offer significant scope for scaling up given the nascent Indian market.

Emkay - Andhra Bank, Coromandel Fertilizer, Spanco Telesystems

Andhra Bank

Coromandel Fertilizers

Spanco Telesystems

Coromandel Fertilisers: Buy

The stock of Coromandel Fertilisers appears a good `value' buy for investors with a one-year investment perspective.

After the recent market decline, the stock trades at Rs 71, at a price-earnings multiple of eight times the likely FY-07 earnings (based on standalone financials).

There appears scope for a significant ramp-up in the company's earnings from current levels — from the likely merger of Godavari Fertilisers, expansion into new markets for agri-inputs and the steady growth prospects in the fertiliser business, given the domestic shortages.

Though fertiliser and agrochemical businesses are generally perceived as cyclical and risky, Coromandel Fertilisers (CFL) has shown the ability to weather adverse business cycles in the past and has made the strategic moves to secure future earnings and growth.

Business

CFL's business operations span phosphatic and complex fertilisers, insecticides, fungicides and herbicides.

As one of the largest manufacturers of phosphatic/complex fertilisers with an extensive distribution network in the South and East, CFL is well-positioned to capitalise on the persisting deficit for phosphatic/complex fertilisers in the domestic market.

The company's strategic moves to secure raw material supplies through long-term supply arrangements with global suppliers, such as Groupe Chimique Tunisien and Foskor, are also a source of competitive advantage in an industry where players enjoy limited pricing power.

With effect from April 2007, the domestic phosphatic fertiliser industry is likely to move to a system of import parity pricing.

CFL will be a key beneficiary of the new policy regime, given its scale advantages, high cost-efficiencies and access to raw materials at globally competitive prices.

Strong balance-sheet

The company has also steadily ramped up production volumes and sales at the acquired facility of Godavari Fertilisers over the past four years, with the latter's operations turning around and registering a net profit of Rs 43 crore on sales of Rs 1,418 crore in the nine months ended December 2006. CFL's equity stake in Godavari may climb to 90 per cent after its recent move to acquire IFFCO's stake in Godavari and make an open offer to the latter's shareholders.

This raises the possibility of a merger between the two companies at a later date. The addition of Godavari Fertilisers' operations to CFL has the potential to add substantially to earnings and sales, at the cost of marginal equity-dilution.

Though the proposed capex plans for fertilisers may require an additional infusion of funds, the company has the balance-sheet strength to absorb additional debt, without straining the earnings.

The strengths

In the agrochemicals business, CFL's advantages lie in its extensive distribution reach, which leaves room for marketing alliances with multi-national corporations (MNCs) and low-cost manufacturing capabilities for generic agrochemicals catering to the domestic and export markets.

In this context, a recent move to set up a pesticide formulation unit at Jammu could give the company significant cost-advantages (due to excise and tax exemptions), crucial in the price-sensitive market for crop protection chemicals.

The acquisition of Ficom Organics — an agrochem manufacturer — has helped the company acquire production bases in the northern and western regions, enabling it to cater to new markets and widen its geographic footprint.

In the nine months ended December 2006, CFL reported a 28 per cent growth in net profits, on the back of a 24 per cent growth in net sales.

The above factors make the stock a good addition to the portfolio of a conservative investor.

nvestors can use the current price levels and any weakness in the stock linked to the broad markets, to accumulate the CFL stock.