Zuari Agro

Zuari Agro is on a roll thanks to its turnaround Q2 numbers. The company, which has been more in news lately for its takeover battle with Deepak Fertilisers for Mangalore Chemicals and Fertilizers (MCF), is today zooming up on posting a net profit of Rs.22 crore for Q2FY15 v/s net loss of Rs.40 crore in previous Q1 and loss of Rs.38 crore in Q1FY15. Net sales rose 8% (YoY) at Rs.1421 crore. EBITDA margin rose from a pathetic 0.91% to a very healthy 5.29%. This performance was despite the fact that its Ammonia/Urea plant was shut down for more than a month, from 8th Aug to 22nd Sept due to mechanical breakdown.

The company has a huge interest outgo. It ate away 73% of the operating profit but this is on account of the loan taken to represent Govt recievables on account of delay in subsidy payments. The company is currently undertaking capex for revamping and debottlenecking its Goa DAP-NPK operations. Its capex of Rs.299 crore are to be funded through debt which are yet to be tied up. It is also planning on a US$800 million DAP plant in UAE, funding and details of which are yet to be tied up. The company’s aggressive open offer for MCF, which raised the offer price to Rs 81.60 from Rs 68.55 raised eye brows as funds for the buyout was to happen through Zuari Agro but the promoters stated that they would bring in the funds.  The company continues to remain vulnerable due to vagaries of climate, the ongoing issue of subsidy, price fluctuation and finalisation of large debt-funded capital expenditure programme.