COROMANDEL - Coromandel International Limited Share Price

Management provided an optimistic yet cautious outlook during the earnings call. Mr. S. Sankarasubramanian, the Managing Director and CEO, noted that the Indian Agriculture sector witnessed moderate growth with an Agri-GDP increase of 2.4% in the last year, despite challenges from uneven climatic conditions and softening Agri-commodity prices. Key forward-looking points include:

1. Weather Forecasts: For the upcoming kharif season, weather forecasting agencies have estimated below-normal monsoon conditions, but strong reservoir levels have supported improved sowing activities. The Indian Meteorological Department (IMD) is expected to issue updates by the end of May, which will provide clarity.

2. Government Subsidy Plans: The government has announced a 10% increase in nutrient rates for Kharif 2026. However, management emphasized the need for further support to address affordability issues, particularly in light of rising raw material prices due to the Middle East crisis.

3. Raw Materials Supply: Management highlighted the significant dependence on the Middle East for ammonia and sulfur, reporting over 80% reliance. They expect to maximize supplies in Q1 and are collaborating with a committee focused on fertilizer production and raw material sourcing.

4. Production and Growth Targets: For the previous year, the company achieved record fertilizer production of 3.5 million tons. The phosphoric acid plant at Kakinada was successfully commissioned, with expectations to operate at desired capacity soon.

5. Sales and Market Share: Coromandel reported record sales of 4.3 million tons of DAP and NPK, up 7% year-over-year, along with a market share of 17.5% in the phosphatic sector.

6. Financial Performance: Revenue for FY26 reached INR 31,827 crores, a 30% increase, and EBITDA reached INR 3,232 crores compared to INR 2,628 crores in the prior year. Net profit after tax for the full year was INR 1,898 crores.

Management indicated ongoing efforts to address pricing and raw material volatility while maintaining strong operational performance across various segments. They remain hopeful for government intervention to ensure fertilizer affordability for farmers.

1. Question: If I compare the consolidated P&L and standalone P&L, how is BMCC as an entity placed in terms of financials?

   Answer: The amortization expense reflects accounting treatment for mining costs. BMCC has turned profitable, benefitting from increased operations, better fixed cost absorption, and improved efficiencies. While the standalone is profitable at EBITDA, certain intangibles get amortized in consolidation, affecting overall numbers.

2. Question: What are the expected margins of the fertilizer business this season given the raw material prices?

   Answer: The industry has some carryover inventory initially, yet replacement costs are high. Prices for Ammonia and Sulphur have surged. We are in discussions with the government for additional subsidies to manage costs and maintain affordability for farmers. If the situation doesn't stabilize, price corrections may be necessary.

3. Question: How do you see the growth opportunity post the NACL acquisition for your crop protection business?

   Answer: The standalone crop protection business achieved a revenue of INR 3,053 crores. There is strong growth potential due to improved export performance, new registrations, and capacity expansions. Margins for NACL should stabilize around 9%-10% going forward, with significant product introductions expected.

4. Question: Can you give the EBITDA breakup for the full year in terms of subsidy and non-subsidy?

   Answer: The subsidy business share for Q4 is 57% and 66% for the year. For the standalone crop protection business, exports are INR 1,450 crores, domestic B2B revenue is INR 700 crores, and formulations account for INR 900 crores.

5. Question: What is the current Phosphoric Acid price and the pricing for Ammonia and Sulphur?

   Answer: Phosphoric Acid is priced at USD 1,360 per ton, up from USD 1,290. Ammonia prices are around USD 840-850, and Sulphur costs are similarly positioned at about USD 800.

6. Question: What is your guidance on margins given the raw material inflation?

   Answer: Predicting margins is difficult as we await government action on subsidies. The current situation is fluid and we expect improved conditions as supply chains stabilize; price normalizations should follow.

7. Question: What's your expectation regarding subsidy compensation from the government?

   Answer: For the current crisis, we hope for cost-to-cost reimbursements to mitigate sudden price increases for farmers. We are discussing potential pass-through mechanisms similar to previous years; however, precise predictions of the government's response remain uncertain.

8. Question: What's your current status on sourcing raw materials, specifically Sulphur, and the adjustments made recently?

   Answer: We've diversified our Sulphur sources beyond the Middle East, including Canada and domestic options. While prices have risen, there's substantial availability, though shipping bottlenecks are a concern. We expect improvements in sourcing as shipping conditions normalize.