Home >Markets >Mark To Market >Rallis shows margin uptick in Q4 amid price headwinds

Rallis India Ltd reported a decent Q4 performance, thanks to a favourable monsoon season in 2020. Improved rural incomes post a healthy kharif harvest, good water reservoir levels and winter crop or rabi crop all added up to healthy profitability for the agri-input manufacturer.

Not surprisingly, the crop care division witnessed revenue growth of 38% year-on-year (y-o-y), while the seeds business registered a revenue growth of 7% y-o-y. As a result, overall revenues grew 36%.

Not only did the domestic business record a 14% revenue growth, international business too registered a robust growth. This was despite weakness in contract manufacturing revenues and soft prices for metribuzin, a herbicide. Rallis commands a sizeable market share for metribuzin and is among the global leaders.

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Satish Kumar/Mint

Given the favourable farm sector performance, domestic growth was expected but international business growth was a positive surprise, analysts said. The company is now focused on driving contract manufacturing business. The capacities for metribuzin have been doubled and that of at least two more molecules are being ramped up. Further, metribuzin prices may have bottomed out, analysts at Antique Stock Broking Ltd had said in a March note. Hence, exports growth would be monitored closely by investors.

In the domestic market, the company is targeting at least two molecule launches every year to keep a healthy business growth. Besides, Rallis is also focusing on growing its rabi season product portfolio. The company has also lined up a sizeable capital expenditure for a better product mix, enhancement of research and development capabilities. In essence, the company is putting all efforts to boost growth both domestically and internationally. But growth should also come with profitability.

Here, the company’s improving margin profile gives enough reason to cheer. Note that rising raw material costs have impinged on pricing products competitively.

The Ebitda (earnings before interest, tax, depreciation and amortization) margin for the crop care segment jumped to 7.7% for Q4 compared with just 1.9% last year. For the full-year too, Ebitda margins at 13.3% are an improvement from 11.3% for FY20.

Forecasts of normal rainfall for 2021 also bodes well for Rallis and Street sentiment in the near term will be governed by the monsoon’s progress.

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