BASF India — Q4 FY24 earnings call

Call held 22 May 2024

Management summary

BASF India delivered a strong performance in FY24, characterized by significant profit expansion despite flat revenue growth. The company successfully navigated a challenging global environment marked by China overcapacity and pricing pressure in upstream chemicals. Growth was primarily driven by the Agricultural Solutions segment and strong volume growth in downstream businesses, which offset negative price realizations.

Highlights

  • Full-year Revenue reached ₹13,768 crores, a marginal 1% increase YoY despite significant pricing headwinds.

  • Q4 PBT (before exceptional items) more than doubled YoY to ₹219 crores, marking the third-best quarterly result in company history.

  • Full-year EPS grew significantly to ₹130 per share compared to ₹90 in the previous fiscal year.

  • Agricultural Solutions segment was the primary profit driver, contributing ₹205 crores to the total ₹230 crores EBIT improvement for the year.

  • ROCE stood at a robust 26% for the full year, with RONA (Return on Net Assets) at 29% when excluding cash surpluses.

  • The Board recommended a dividend of ₹15 per share (150% of face value).

  • Net Working Capital was maintained at ~₹1,000 crores despite revenue growth, reflecting disciplined inventory and receivable management.

  • Capacity utilization across plants remained high at 80% to 85%.

Concerns

  • China Overcapacity and Dumping

  • Vitamin A Pricing Pressure

Key financials

  1. Revenue ₹13,768 Cr +1%YoY
  2. PBT before Exceptional Items ₹219 Cr +100%YoY
  3. EPS ₹130 +44%YoY
  4. ROCE 26%
  5. Net Working Capital ₹1,000 Cr 0%YoY

What they filed

Q1 FY27: revenue up 28.9%, net profit up 146.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,248 3,635 3,189 3,752 3,904 −8%3,877 +7%3,453 +8%4,837 +29%
EBITDA201 170 63 222 154 −23%169 −1%112 +78%505 +127%
Net profit128 104 47 147 101 −21%105 +1%64 +36%362 +146%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Agricultural Solutions
    ₹2,000 Cr Revenue14% Revenue Share₹205 Cr EBIT Contribution to Growth
  • Chemicals
    -17% Revenue Growth₹1,700 Cr Revenue
  • Nutrition and Care
    ₹36 Cr Segment Profit₹100 Cr Previous Year Profit

Guidance & targets

Other

  • Renewable Electricity Usage (Mangalore) Other · Next Year · High confidence 90%

    From 60% today

    we're going to move from 60% of our electricity usage in Mangalore being green to 90%

    — Alexander Gerding, Managing Director

  • CSR Kids Lab Participation Other · End of Year · High confidence 3000
    by the end of this year we would like more than 3,000 kids to have passed through our kids lab.

    — Alexander Gerding, Managing Director

Capacity

  • Capacity Utilization Capacity · Ongoing · Medium confidence 80-85%
    on a overall basis it's around 80% to 85% capacity utilization across the plants

    — Alexander Gerding, Managing Director

Risks & concerns

  • China Overcapacity and Dumping

    high

    Excess capacity in China is leading to dumping in India, keeping upstream chemical margins under heavy pressure.

    Management acknowledged

  • Vitamin A Pricing Pressure

    high

    Vitamin A prices have been under significant pressure, causing the Nutrition and Care segment profit to drop from ₹100 cr to ₹36 cr.

    Management acknowledged

  • Red Sea Logistics Disruptions

    medium

    Potential for delays and increased costs in shipments for businesses dependent on imports.

    Management acknowledged

Areas of evasion (1)

  • Specific capacity utilization numbers for individual sites (stated as a policy not to disclose).

Q&A highlights

3 direct
Drivers of Agrochemical Growth in a Depressed Market Direct
We placed our product more closer to application timing also allowing us to shift the products to the right places in the country where it is needed... that has allowed us really to be able to react nicely and not to sit with too much Channel inventory.

Explains how BASF outperformed the sector by managing inventory tightly and focusing on high-margin new launches (Exponus, Efficon) rather than volume dumping.

Asked by Archit Joshi, B&K Securities

Impact of China Overcapacity and Dumping Direct
We need a strong Chinese consumption to kick in again to reduce also a little bit this dumping into India yeah from overall capacities that have been built and continue to be built in China.

Highlights the primary external risk to the upstream Chemicals and Materials segments, where pricing remains under severe pressure.

Asked by Rohit Nagraj, Centrum Broking

Capex and Capacity Utilization Direct
Last year financially 24 we had around 100 crores of capex mostly a maintenance capex which means no increase in capacity... our asset utilization is recognized and is good and we really have a track record of sweating our assets.

Confirms that recent growth has been achieved through better utilization of existing assets rather than heavy capital expenditure, leading to high ROCE.

Asked by Rohit Nagraj, Centrum Broking

2 min read 5 chapters

Detailed narrative

Agricultural Solutions: The Engine of Growth

The Agricultural Solutions segment reached ~₹2,000 crores in revenue, representing 14% of total sales. More importantly, it was the standout profit driver, contributing ₹205 crores to the company's total ₹230 crore EBIT improvement. This was achieved through a strategic focus on 'blockbuster' insecticide launches like Exponus and the new Efficon, alongside disciplined channel inventory management that avoided the 'dumping' seen elsewhere in the industry.

Upstream Margin Compression vs. Downstream Resilience

A clear divergence emerged between upstream and downstream businesses. Upstream Chemicals saw a 17% revenue decline to ₹1,700 crores due to global overcapacity and Chinese dumping. Conversely, downstream segments like Coatings and Materials remained resilient, benefiting from India's 'momentum' in automotive (4% projected growth) and infrastructure spending. While input costs fell, pricing pressure remains a persistent headwind in commoditized segments.

Operational Excellence and Working Capital Discipline

BASF demonstrated exceptional capital efficiency, maintaining Net Working Capital at approximately ₹1,000 crores even as sales grew from ₹9,500 crores to over ₹13,600 crores in recent years. Inventory is managed at ~70 days and receivables at ~65 days. This discipline supported a high ROCE of 26% and a RONA of 29%, allowing the company to fund operations and dividends from internal accruals without new borrowing.

Nutrition and Care Facing Vitamin A Headwinds

The Nutrition and Care segment faced significant profitability challenges, with profits falling to ₹36 crores from ₹100 crores in the previous year. This was primarily attributed to severe price erosion in Vitamin A. Management noted that while volumes are developing nicely in care chemicals (UV filters, optical brighteners), the product mix currently favors lower-margin commoditized products over high-margin specialties.

Strategic Investments and Capacity Utilization

The company is operating at a high overall capacity utilization of 80-85%. FY24 capex was modest at ₹100 crores, primarily for maintenance. However, management highlighted recent expansions like the second dispersion line in Dahej (already full) and the new E-coat facility in Mangalore. They are now evaluating debottlenecking opportunities for FY25 to cater to growing domestic demand in the automotive and construction sectors.

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