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India Equity Research Reports, IPO and Stock News
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Agrium’s Q1CY12 core PAT declined 3.1% YoY on the back of margin compression owing to lower realizations and higher costs for most products. Management of Agrium guides that owing to strong demand for fertilizers in North America, Europe and South America, the fall in nitrogenous and phosphatic fertilizer prices seen over the past few months has been arrested. In this context, we believe that Indian companies are working towards finalizing contracts for raw materials like phosphoric acid. However, they are likely to keep on hold contracting for finished fertiliser imports like DAP and MOP for some more time considering high inventory in India.
Strengthening global agri fundamentals to boost crop inputs demand
Agrium guides that during Q1CY12, the global agriculture fundamentals have strengthened owing to continued high levels of crop prices, deriving support from low stocks-to-use ratio for many crops globally. The demand from North America has been strong during Q1CY12 owing to the early start of cropping. Going forward, Agrium expects strong demand from South America, Europe and India for urea and phosphatics.
Agrium anticipates Indian imports of urea and phosphatics to pick up
Agrium stated that Phosphate prices declined in the first quarter of 2012, driven by weak demand and uncertainty about India. On the other hand, the US gulf urea prices which have declined ~25% in Q4CY11, have bounced back ~80% by Q1CY12 end owning to strong demand from North America, Europe and South America. Even on the phosphates front, prices have stabilized towards the end of Q1CY12 owing to advancement in US cropping season and strong demand from South America. On India front, Agrium expects pick up of urea and phosphate import volumes, owing to the start of the new cropping season coupled with the stoppage of the decline in the prices. On the potash front, Agrium guides that prices have been holding up quite strongly and India is likely to delay potash imports for some more time.
Decline in realizations weigh on profitability
In Q1CY12, Agrium’s three segments—retail, wholesale and advanced technologies— posted YoY revenue growth of 34.5%, -1.7% and 66.7%, respectively, which resulted in revenue growth of 22.9%. However, EBITDA margin declined 240bps YoY and 1,050bps QoQ to 9.3%, owing to lower realizations and higher cost of raw materials for most products, which has resulted in core PAT declining 3.1% YoY to USD155mn.
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