Q1FY24 Review: Farm Inputs & Chemicals: Q2 to be largely similar to Q1

21 Aug 2023 , 11:11 AM

Q1FY24 turned out to be a shakeout quarter for Indian Chemical manufacturers, both for bulk chemicals and specialty basket. Agrochemical companies had a slow start in Q1, owing to delayed onset of monsoon and uneven rainfall that impacted sowing pattern. Export growth got impacted as well. The common trend across companies was a steep product-price decline due to excess channel inventory — leading to demand slowdown. The management across companies commented on the customers postponing purchases because of extreme volatility in prices and continue to be in a wait-and-watch mode. 

Downgrades by global agchem majors: 

Global crop protection majors have downgraded their revenue for CY23 and expect 2H’23 to remain muted. Recovery is expected from CY24. In Q1, domestic crop protection revenues for PI, UPL, BASF and Rallis were under pressure. With rainfall improving, sowing has picked up in Q2 and should trigger agrochemical liquidation/consumption. 

Washout quarter for Chemicals: 

In Q1FY24, bulk chemicals reported weak performance, on the back of steep decline in key product prices. Soda ash was an exemption as global prices stayed firm, while domestic prices were under pressure. Domestic prices of soda ash, caustic soda, refrigerants and PVC continued to be under pressure, with Chemplast Sanmar reporting Ebitda loss. 

New capex announcements take a pause: 

Barring Deepak Fertilisers that announced Rs19.5bn capex for setting up weak nitric acid & concentrated nitric acid plant, the new capex announcements by chemical companies were muted during Q1. However, the companies remained committed on their ongoing capex and were optimistic about recovery during 2H’24.