Agrochemical Companies Face Challenges Due to Heavy Monsoon, But Future Looks Bright
In New Delhi, India, agrochemical companies are experiencing a slow growth period for the July-September quarter. This is due to excessive Southwest Monsoon rains, high leftover stocks, and price pressures, according to a report by financial advisory firm Anand Rathi. Despite these challenges, the report suggests a positive outlook for the upcoming Rabi season, thanks to improved soil moisture and water reservoir levels.
Anand Rathi noted that the industry is cautious about pushing inventory into the market due to high carried-over stocks from last year. Price pressures continue both domestically and globally. The firm expects revenue, EBIDTA, and profit after tax for agrochemical companies to grow by 4%, 7%, and 35%, respectively.
Domestic agrochemical companies are likely to see mid-high single-digit revenue growth in the July-September quarter, mainly because of higher-than-expected rainfall during the peak sowing season, which affected spraying activities. On the export front, a quarter-on-quarter recovery is anticipated, driven by volume contributions, although prices remain under pressure year-on-year.
Looking ahead, Anand Rathi believes that performance will likely improve in the second half of 2024-25. This year’s Southwest monsoon rains in India reached a four-year high, with 108% of the long period average at 934.8 mm, according to the India Meteorological Department. The above-normal rains have helped farmers sow more crops this Kharif season, benefiting the agriculture sector, which is crucial for millions of Indians.
India’s Kharif crop sowing has been robust, with crops planted across 1,108.57 lakh hectares, a 1.9% increase from the same period last year, surpassing the average area under cultivation from 2018-19 to 2022-23, as per agricultural ministry data.
Doubts Revealed
Agrochemical Companies -: Agrochemical companies make products like fertilizers and pesticides that help farmers grow crops. They are important for agriculture, which is the practice of farming.
Monsoon -: Monsoon is a season in India when it rains a lot. It usually happens from June to September and is important for farming because it provides water for crops.
Rabi season -: The Rabi season is a farming season in India that starts after the monsoon, around October, and ends in March. Crops like wheat and barley are grown during this time.
Anand Rathi -: Anand Rathi is a company that provides financial advice and services. They help people and businesses understand and manage their money better.
EBIDTA -: EBIDTA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a way to measure how much money a company makes from its regular business activities.
Kharif crop -: Kharif crops are grown during the monsoon season in India, from June to October. Examples include rice, maize, and cotton.
