Coromandel International (COROMANDEL) Q4 02/03 earnings summary

Executive summary

• FY2002-03 was pressured by severe drought across key markets and a revised complex-fertiliser subsidy formula; improved plant efficiency and lower financing costs partly offset the impact.

• Total income was Rs 589.77 crore and profit after tax was Rs 27.03 crore, versus Rs 679.71 crore and Rs 45.54 crore, respectively, in FY2001-02.

• Production was curtailed to 5.5 lakh tonnes despite annual capacity above 6 lakh tonnes; management cited readiness to increase output as demand improves.

Financial highlights

• Income from operations was Rs 576.25 crore, down from Rs 650.60 crore YoY; other income was Rs 13.52 crore versus Rs 29.11 crore.

• Profit before tax fell to Rs 46.49 crore from Rs 73.08 crore; profit after tax was Rs 27.03 crore versus Rs 45.54 crore.

• The revised subsidy formula reduced FY2002-03 pre-tax profitability by Rs 25.50 crore; drought-related complex-fertiliser sales were about 37,000 MT below the prior year.

• Lower interest costs, improved efficiencies and lower fixed costs partly offset the pressures; interest liability declined by about Rs 4.80 crore YoY.

• The Board recommended a final dividend of 30%, taking the total FY2002-03 dividend to 60%, versus 70% in FY2001-02.

Outlook and guidance

• Near-term turnover target was about Rs 1,000 crore, conditional on a good monsoon, improved efficiencies and more suitable government policy, particularly on Sulphur.

• Fertiliser inventory built up by year-end was expected to be liquidated during Kharif 2003; intense competition was expected to ease by Rabi 2003-04.

• Management expected phosphorus demand to grow about 4% p.a. over the next three years in India and its addressable markets, with limited near-term import needs as supply matches demand.

• Strategic priorities included cost competitiveness, distribution expansion, product-mix flexibility and potential acquisitions of synergistic phosphatic-fertiliser businesses.