Agrochemical Company Coromandel International's Quarterly Profit Falls 15% Due to Soaring Cost

Indian agricultural chemicals maker Coromandel International Ltd announced on Monday a 15% decrease in its quarterly profit, despite experiencing a significant upturn in demand. The company's earnings were adversely impacted by the significant increase in costs.

The downturn in profitability comes as a surprise since Coromandel International had been reporting consecutive quarterly profit growth in the previous four quarters. The demand for the company's products had been buoyed by increased crop sowing and firm crop prices.

During the quarter, Coromandel International recorded a consolidated net profit after tax of 2.46 billion rupees ($30.08 million), down from 2.9 billion rupees in the same period the previous year. Although the company experienced substantial growth in revenue from operations, which rose by nearly 30% to 54.76 billion rupees, it failed to match the steep 32% increase in total expenses.

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However, industry analysts attribute the decline in profitability to a combination of factors. The fertiliser sector encountered challenges in the fourth quarter as high channel inventory resulted from moderate growth in demand and a decline in raw material prices. Moreover, reduced pest infestations have affected the consumption of pesticides, which further impacted the demand for Coromandel International's products.

Coromandel International's peer, UPL Ltd, also faced a similar setback, reporting a 42% drop in its Q4 profit due to rising raw material costs. These challenges highlight the difficulties faced by the agricultural chemicals sector as a whole.

Also Read: UPL's Q4 Profit Drops 42% Amid Surging Costs in Indian Agri Chemicals Industry 

Comparing Coromandel International's valuation estimates with its peers, the company has a price-to-earnings (PE) ratio of 14.01 and an enterprise value-to-EBITDA (EV/EBITDA) ratio of 9.78. Although the company's revenue growth rate for the next 12 months is projected to be -19.33%, the mean analyst rating remains "Strong Buy," indicating positive sentiment towards the stock.

Coromandel International's decline in quarterly profit showcases the impact of escalating costs on its financials, despite robust demand for its products. The company will need to carefully manage its expenses to improve profitability and navigate the challenges facing the fertiliser and pesticide sectors.

Source: Reuters

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