Agrochemicals sector to witness 3% dip in revenue in FY24 on tepid demand: Report
agrochemicals sector is likely to witness 3 per cent decline in revenue in this financial year due to falling prices, tepid demand and lower reservoir levels, a Crisil report said on Wednesday. For the first time in a decade, agrochemical makers will see a 3 per cent drop in revenue in 2023-24 due to falling prices globally following a supply deluge from China, muted demand for exports (53 per cent of revenues) owing to destocking by global manufacturers and the impact of lower reservoir levels on rabi sowing, the report said.
Operating margins too may plunge by 400-450 basis points (bps) to a decadal low of 10-11 per cent this fiscal due to lower volumes and realisations, impacting cash accruals for agrochemical players, it stated.
The current muted demand is prompting agrochemicals manufacturers to prune their capital expenditure (capex) plans, the report said, adding this coupled with healthy balance sheets should provide sufficient headroom to withstand business pressures.
«Increased supplies of low-priced products from China prodded global agrochemicals companies to increase inventory by 45 days between January and June. The subsequent destocking amid a slowing global economy led to slump in exports from India in the first half of this fiscal.
»However, with global manufacturers restocking before the onset of the cropping season in Latin America and the US, which accounts for 55 per cent of exports, a recovery in overseas demand should begin from November," Crisil Ratings Director Poonam Upadhyay said.
Meanwhile, the report stated that volume growth within India will be in the low single digit this fiscal year given that inventories with domestic manufacturers are high because of lower exports.
