Godrej Agrovet Q1 FY27 earnings call

Godrej Agrovet Limited reported consolidated sales of ₹2,852 crores in Q1 FY27, marking a 10% year-on-year growth. This growth was achieved despite a challenging operating environment characterized by a delayed monsoon and inflationary pressures from geopolitical tensions. The company maintained its focus on balance sheet efficiency, with average net working capital improving significantly year-on-year, supporting cash generation and enhancing return on capital employed.

The Animal Nutrition business delivered a robust quarter with 12.6% revenue growth, driven by strong demand, improved realizations, and a 15% increase in cattle feed volumes. Segment results for Animal Nutrition grew by 29%. The Oil Palm business continued its growth momentum, with revenue increasing by 28.9% and segment results growing by 14.4%, supported by higher CPO and PKO realizations and improved oil extraction efficiency (OER improved from 18.4% to 18.8% YoY). The Bangladesh joint venture also returned to a strong growth trajectory with double-digit growth in volumes, revenue, and PBT.

The Crop Care business was significantly impacted by a delayed monsoon and slower kharif sowing, leading to a 16.2% decline in revenue and reduced profitability. Management noted that June was particularly dry, with a 40% deficit. To mitigate dependence on seasonal factors and specific crops like cotton herbicide, the company is aggressively diversifying its portfolio with new product launches such as Ashitaka (maize herbicide), Takai (paddy insecticide), and Ghassnash (soybean herbicide). Ashitaka and Takai combined contributed approximately 18-20% of Q1 sales, and management expects overall EBIT margins to hold around 26-27%.

Astec LifeSciences sustained its operational recovery, achieving EBITDA breakeven in Q1 FY27, a significant improvement from an INR11 crores EBITDA loss in Q1 FY26. This turnaround was driven by margin expansion across both enterprise and CDMO categories. While revenue was moderately lower due to a product mix change, management is confident of achieving over 20% revenue growth for the full year, an upward revision from earlier guidance of around 20%. CDMO is expected to contribute 50-52% of the revenue for the year.

The Dairy business reported 11.4% revenue growth, primarily driven by healthy volume growth in value-added products, whose salience increased from 42% to 49% of sales. However, profitability was affected by elevated milk procurement prices and packaging inflation. Godrej Foods maintained broadly stable revenue despite a planned reduction in live bird volume, with branded volumes growing 6% and Yummiez volumes up 22%. Both segments are undergoing strategic shifts towards a majority B2C, value-added portfolio, with Godrej Foods aiming for 65-70% B2C share by the end of the LRP period and phasing^📎 out live bird trading to marginal levels (₹20-30 crores) over five years.

Godrej Agrovet is aggressively expanding its Oil Palm operations, with plans to increase planted area from 80,000 hectares to approximately 150,000 hectares as part of its long-range plan. The company is also making a significant shift towards downstream integration, moving from a pure upstream business to a full integrated value-added model. This includes the establishment of India's first integrated palm oil complex in Kannan and the planned rollout of a specialty fats refinery by end-August/early September, which is expected to add around 200 bps to the overall EBITDA profile when fully scaled up.