Meghmani buoyant in second quarter

After a lacklustre first quarter, Indian company Meghmani Organics (Ahmedabad) has bounced back in the second quarter ended September 30th 2007. The company's agrochemical sales registered Rs 1,001.2 million ($25.3 million), an increase of 28.3% over the same quarter last year. Strong growth in both domestic and export markets resulted in the positive performance. The agrochemical division accounted for 58.5% of total sales of Rs 1,711.1 million for the company.

 

Meghmani has been focusing on the export market. Earlier this year, it received registrations for selling acephate and pyrethroid insecticides in the Brazilian and Pakistani markets, respectively. In addition, a rise in acephate sales in the domestic market was one of the drivers behind the strong growth. The company's cypermethrin insecticide production plant is functioning at 129% capacity.

 

One of the reasons for the company's sales decline of 5.6% in the first quarter was a dip of 26.3% in exports, even though domestic sales had been strong, growing at 45.2%. A recovery in the second half resulted in export growth of 27.7%, which was in step with the growth of 28.6% in domestic sales. resulted in first-half exports being down by just 1.6%. The good Indian monsoon also contributed to the strong 32.5% first-half growth in domestic sales.

 

Meghmani's agrochemical results (Rs million)

2nd qtr ended Sept 30th            2006      % change       2007

Sales                              780.4      +28.3       1,001.2

 domestic                          478.1      +28.6         615.0

 exports                           302.3      +27.8         386.2

Gross profit                       174.2      + 8.6         189.2

Six months

Sales                             1,287.9     +14.8       1,480.2

 domestic                          624.8      +32.5         827.8

 exports                           663.2      - 1.6         652.3

Gross profit                       289.9      + 1.2         293.4

 

Gross profit growth was 8.6%, which was in contrast to a dip of 9.9% in the previous quarter. One of the reasons for the gross profit growth not keeping step with revenue growth was a squeeze in profit margins due to pricing pressures, resulting in a 1.8% decrease in profit margin. The increasing strength of the rupee against the US dollar played a role in inflating other operating expenses for the company, which increased by a whopping 2,319.4% for the company. The strong rupee has been a source of concern for Indian exporters for quite some time. There is also the threat of -continued high raw materials costs driven by strong Chinese demand" that could impact on the company's profit margins in fiscal 2008, according to managing director Ashish Soparkaar, managing director.

 

The company held 90 approvals worldwide as of March 2007. It has 430 new registrations in the pipeline in 60 countries.

 

Meghmani is upbeat about the global agrochemical market outlook for 2007, with normal weather conditions in the US, Australia, Latin America and northern Europe. The company also cites an increase in crop demand due to emphasis on biofuels and an increase in crop areas. The situation is an improvement on last year, when agriculture was affected by adverse weather conditions in different parts of the world.