Fertiliser sales resilient to monsoon

In the past, urea and complex fertilisers (potassic and phosphatic) sales have remained healthy even during the drought years — 2002, 2004 and 2009. This is because the bulk of the fertiliser purchase happens before the monsoon sets in; application happens even before sowing.

The strong demand for urea-based fertilisers makes them resilient. The large subsidy support that covers three-fourth of the actual cost further helps these manufacturers. For instance, despite a 21.8 per cent below normal rainfall in 2009, the urea segment of Chambal Fertilisers and National Fertilisers managed to increase their operating profit by 10 per cent and 24 per cent, respectively, in 2009-10. Likewise, the complex fertiliser sales (volumes) for listed players Coromandel International and GSFC remained healthy during drought years. While profits grew during 2002 and 2004, they were lower in 2009-10 as fertiliser prices fell globally and the subsidy then was calculated on the international fertiliser prices.

While a weak monsoon may not impact sales in the current fiscal, significant fall in farm income this year will have an impact on complex fertiliser sales in 2014-15. This is because the selling price of complex fertilisers is now decontrolled.

But more than the monsoon, the movement in currency and input costs is more critical to the performance of complex fertiliser makers.