The Hindu Business Line : Agrochem cos likely to post good numbers

DESPITE the delay in the onset of monsoon rains, agrochemical companies are expected to turn in a fairly good financial performance during the crucial quarters of September and December 2005, analysts and industry representatives say.

"Recent widespread rains across the country should augur well for the kharif as well as the rabi crop. With the monsoon season drawing to a close, there should be some offtake of agrochemicals," said Mr Rajju Shroff, Chairman and Managing Director, United Phosphorus Ltd.

Overall, agrochemical companies should turn in good performance barring a few entities in North India where rains have been delayed.

"Offtake of agrochemicals in Punjab and Haryana has not been up to expectations," said Mr Pradeep Dave, President of Pesticides Manufacturers & Formulators Association of India (PMFAI).

However, Andhra Pradesh, Karnataka and Madhya Pradesh have received good rainfall with a spell of dry weather.

Companies such as United Phosphorus, Excel Crop Care and multinational entities including Bayer CropScience and are expected to report good sales of agrochemicals. Rallis India Ltd is seen sustaining its positive performance primarily on account of a focused approach towards pesticides business.

At the end of 2004/2005 fiscal, the company had returned to the dividend list after three years. Focus on pesticide business, a very strict control on its working capital and a change in product mix helped the company to report profits.

According to Motilal Oswal Securities, United Phosphorus is expected to up its profits following the acquisition of SWAL Corporation, a domestic agrochemicals company. "This acquisition would help expand United Phosphorus' scale in the domestic market."

While sales for agrochemicals are expected to grow, there are worries over input costs which in turn could impact profit margins. Additionally, logistics cost for most manufacturers are on an upward move.

"Manufacturers are mostly in the West and the North while the markets are across the country. With oil prices rising, transport cost has increased," an industry official said.

It may not be possible for companies to pass on cost increases to farmers who have faced some difficulties with late onset of monsoon rains and prolonged dry spell.

Profit margins are also under pressure on account of spurious products floating in the market, Mr Shroff said.

Crop protection companies have been focusing on exports in a bid to sustain top line growth. Overall industry's exports are expected to increase by 10-15 per cent, Mr Dave said.

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