Sumitomo Chemical India Ltd (SUMICHEM) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to Sumitomo Chemical India Limited Q2 and H1 FY27 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. From the management, today we have on the call, Dr. Suresh Ramachandran, Managing Director; Mr. Kunal Mittal, Executive Vice President; Mr. Anil Nawal, Chief Financial Officer; Ms. Deepika Trivedi, Company Secretary and Compliance Officer; and colleagues from SGA, their Investor Relations Advisors. Now, I hand over the conference to Dr. Suresh Ramachandran, Managing Director of Sumitomo Chemical India Limited. Thank you and over to you, sir.
Suresh Ramachandran (Sumitomo Chemical India Ltd): Thank you. Ladies and gentlemen, a very good afternoon to all of you and welcome to the conference call to discuss Q2 and first half FY27 performance of Sumitomo Chemical India Limited. This is my first earnings call since taking charge as Managing Director on 1st September of 2026 and I would like to begin with a few words on that transition. First, on behalf of the entire SCIL family, I would like to extend our sincere thanks to Dr. Mukul Asher, who completed his term as Chairman and Independent Director on 31st August 2026 for his outstanding leadership and immense contribution to our journey over many number of years. As we shared on our last call, Mr. Chetan Shah completed his term as Managing Director on 31st August 2026. Following shareholders approval, he has been appointed as Non-Executive Non-Independent Director and has been also appointed as Chairman of the Board. Mr. Sushil Marfatia also completed his term as
Suresh Ramachandran (Sumitomo Chemical India Ltd): chief director on 31st August 2026. On behalf of the entire SCIL family, I want to place on record our deep gratitude to both of them. Over many years, they built the teams, distribution reach, channel, the manufacturing base, the brands, and above all, the culture of discipline that this company stands on today. We are fortunate that Mr. Shah continues to guide us as Chairman, and Mr. Mafatlal as Advisor, and both of them remain available to us in an advisory capacity. We also welcome Mr. Anand Mohan Tiwari to the board as Independent Director. The new new management structure, which presented to you in May, is now fully in place. Mr. Kunal Mittal, as Executive Vice President, together with Senior Vice Presidents, Mr. Hajime Shinomiya, and Mr. Fumio Suzuki, anchors the senior management team. Our commitment to you is continuity. The strategy, the financial discipline, and the farmer-first approach that delivered our results over the last several years remain unchanged. What we are adding is a sharper focus on execution, which we call our Good to Great Initiative or Good to Great Transformation, about which Mr. Kunal will speak shortly. Now coming to Indian agriculture and agrochemical industry, how did the industry perform over the last six months of the current financial year? HY H1 FY27 was one of the most difficult first halves for the Indian agrochemical industry in over a decade. The main reason was the erratic and unpredictable monsoon. The Southwest monsoon arrived late and started weak. June rainfall was about 35% below normal. Generally, June month is, June month rainfall is very critical for the sowing operations by the farmers. Because of the delayed rainfall, the sowing of the crops, key crops were delayed until mid-July. July rainfall was close to normal. Of course, it did not cover the shortfall of the June rainfall. August was dry again, about 16% below the normal rainfall, and September did not make up the shortfall. Overall, the season ended with a deficit of almost 13% of the normal rainfall. As per the IMD, this was the fourth weakest monsoon since 2001 and the weakest since 2015. Rainfall was very uneven. East and Northeast India had their lowest monsoon rainfall since 1901 and the South Peninsula was about 24% below normal. Of the 23 key agricultural states, 16 had deficit rainfall of more than 10%. Some even went up to 30%, 40%. Several states, including Maharashtra, Karnataka, Andhra Pradesh, and Rajasthan have declared drought in large parts of their area. Furthermore, India, as a country, IMD have declared it as officially a drought year. Farmers were able to complete sowing with whatever water that was made available, was available by the monsoon, and Kharif acreage ended little bit lower than the normal, about 1.5% below the normal. Rice was the main exception with the acreage almost lower by 4%. However, there were very few days of above-normal rainfall during the season, and crops faced long dry spells at the stage when they need the inputs most, which impacted the agrochemical consumption. Delayed sowing and dry spells reduced herbicide consumption. In August and September, farmers skipped spray rounds, which lowered demand for insecticides and fungicides. Industry reports also show that farmers cut back on total overall agricultural inputs. Production of key crops, such as rice, cotton, soybean, groundnut, pulses, and oilseeds is now estimated to be lower than by almost 10% depending on the crop. To begin at the beginning of the year, between March and May, the cost increased because of the Middle Eastern war. The technical prices went up, a weaker rupee, rupee depreciation, and high packaging solvent and price cost freight cost added up to the overall cost of the inputs. Companies, including SCIL, passed on this increases to a large extent. However, because of the erratic monsoon, sensing that, you know, the season was not going to be normal, from June onwards, the prices started falling down. Some companies took the price correction. Some companies decided to maintain the price. The industry, therefore, carried high-cost inventory into the period of lower volume and softer price in Q2. We focused, SCIL team focused on key products, which were critical for our success. Those products performed very well. Our key brands like Flumioxazin, which is SumiMax, Meishii, Excalia Max, Poshan, ProGibb,
Suresh Ramachandran (Sumitomo Chemical India Ltd): NatureDeep, and Tribasic Copper, all grew in both volume and value. All of these were, our specialty products. Together these products grew about 22% in value over H1 of last year, despite a very weak monsoon. We launched two proprietary products in, in the last quarter. The first one is TopGrain, a patented grain-filling bio-stimulant technology developed by our affiliates, Sumitomo Biorational Company. In the entire world, we are proud to announce that India is the first country to commercially launch this product anywhere in the world. We have introduced it to a limited number of farmers this season, and our teams are measuring the yield benefit at the time of harvest, which is currently going on. The second product is Helimax, which is an insecticide launched at, in a limited extent starting from August to control key caterpillar pests. We also continue to strengthen our digital approach. Our Excalia Max campaign ran across several platforms and one influencer video crossed 1.7 million views. Our SumiMax campaign won the GenAI-led Creative Award at the AdTech India, New Delhi. Each year we run thousand, more than thousand digital campaigns reaching out to 17 million plus digital touchpoints. So, our normal activities we increased, you know, in reaching out to farmers through various means, including digital and physical, through our, our employees, as well as contract workers. Now, coming to the second half of the year, how the, how the outlook looks like. We expect H, H2 of the current financial year to be remained challenging for three main reasons. One, El Niño. The World Meteorological Organization expects El Niño to strengthen further, peak around December, and continue through February 2024. It could be one of the strongest El Niño events since 1950. This overlaps with rabi season, unfortunately. Second, water availability. Current estimates mention that reservoirs levels across the country are at about 71% of the capacity and at least 25% lower than the last year at the same time. Since rabi crops depend largely on irrigation, water availability and soil moisture will decide how much area is planted. Third, the Northeast monsoon. It began on 15th October. It has rained well in couple of areas in southern geography. IMD expects reasonably normal rainfall over the south peninsula. This should help the second season crop. But southern region starts with a large shortfall from summer. This led to lower soil moisture conditions compared to normal period. There are also some positives. Lower harvest estimates have pushed up the commodity prices, whether it's rice, cotton, pulses, oil seeds. All the commodity prices are going up, which means that the farmers are getting the benefit, in terms of income, which they, which would put them in a position to invest in their second crop, in crop protection, apart from other input, agri inputs. Where crop area holds up and prices remain firm, we expect consumption to be broadly normal. The rice area is expected to decline because in southern states, rice cultivation is degraded, discouraged because of the low water availability. Chilli depends on November-December rains, primarily in Andhra and Karnataka. On the positive side, grapes season is looking better. Wheat is expected to be normal. Cumin is expected to be normal. States like UP, Madhya, Chhattisgarh, these states look to be normal as of now and the normal crop area would come. Our H2 priorities are stated below. Focus resources where demand is holding up. I mean, states I mentioned, you know, like UP, Chhattisgarh, some parts of Andhra, Karnataka, and Tamil Nadu, which has rained well. Our focus is in those areas to do the business. Drive key products, we will push Excalia Max, Porshan, Gibberellic acid, and TopGrain. For TopGrain, currently the team is following up on the, like, rice launch to demonstrate it to the farmers. There are good, positive feedbacks, which will help us to introduce it in the wheat in the rabi season, starting from February the, consumption of this product will start. Manage channel and inventory carefully. We will continue to supply the channel based on the actual demand on the ground, and we have started steps to bring our own inventory down through H2.
Suresh Ramachandran (Sumitomo Chemical India Ltd): due to recent regulatory restriction on a competing product. Our goal for H2 is to grow over last year's sales, where the market allows, while protecting profitability. Our portfolio reach, strong relationship with farmers and channel partners position us well to do this. With that, I hand over to Mr. Kunal Mittal to take us through the next portion of this call. Over to you, Kunal.
Kunal Mittal (Sumitomo Chemical India Ltd): Thank you, Dr. Suresh, and good afternoon, everyone. We will try to cover two parts in this. First is about our transformation initiative, and second, something about our operational numbers and our capex plans. So, first, about the Good-to-Great transformation which Dr. Suresh briefly touched upon. With the new management structure in place from 1st of September, we have launched a company-wide program called Good-to-Great: Transform to Secure Our Future. This program and this initiative is built on five pillars. First is about people, how we can build skills, leadership, and accountability through a performance-driven culture. Second part is about operational excellence by improving productivity, quality, efficiency, safety, and speed of our execution. The third pillar is about technology, how to use technologies across all the functions in our company, including for refining our business processes and decision-making process. The fourth important pillar is about data, digital, and automation, how we can bring more, more efficiencies and accuracy in our organization through these initiatives. And the fifth, and one of the most important pillars, is about the cross-functional practice, how all of us, our different functions can work together in a collaborative approach with the mindset of sharing the ownership for the results. So, through this five initiatives and the pillars, I think we are, we are going ahead in this kind of a transformation initiative. And collaboration is very, very important point part of this initiative. This was also a theme of our annual conference which we held in Delhi in the month of April with over 700 members of our commercial team, which is called Sumi Manthan. And in a difficult year like this, these internal initiatives will help us improve our efficiencies and help us achieve our profitability objectives. Now, let's talk about our operating performance. In this environment, which was very challenging due to weather situation, our company delivered a stable performance. Q2 financial year '27, the revenue was rupees 907 crore, down 2% year-on-year. H1 financial year '27, revenue was rupees 1,971 crore, down 1% as compared to previous year. Despite a clear fall in industry volumes and demand, our first half revenue was broadly in line with our last year numbers. In Q1, our revenues were supported by the price increases which we took between the months of March and June 2026. In Q2, we kept our selling prices largely stable. Our sales volume, however, fell by a high single digit percentage due to lower consumption in the adverse weather conditions. Our Q2 margins were affected by the timing of inventory cost. In Q1, we benefited from the lower cost opening inventory. However, in Q2, inventory which we had bought at higher cost between April and June, more in the Q1 part, it flowed into our cost of sales. As a result, our Q2 gross margin was 40.7%, which was down 240 basis point year-on-year, and our EBITDA margins was 20.5%, which was down 297 basis points. For H1 financial year '27, gross margin was 39.9% compared with 40.4% last year, and EBITDA margin was 21.3% compared with 22%. This is broadly in line with our historical levels and in line with our objectives which we have discussed in the past to maintain our EBITDA margins equal to or more than 20% level, which was one of our objective which we have implemented over last few years. The inventory cost levels had largely normalized by the end of
Kunal Mittal (Sumitomo Chemical India Ltd): as cost and selling prices came back in type, came back in line. Our domestic business held up pretty well. Q2 domestic revenues grew 2% to Rs. 774 crore, and H1 domestic revenue was broadly stable at Rs. 1,657 crore. Branded products made about 79% of domestic revenue. If we talk about exports, there was a decline of 23% in Q2 to Rs. 127 crore, mainly due to the timing of shipments to Japan and South America. For H1, exports were stable at Rs. 300 - Rs. 300 crore, with Africa, South America, Asia and Europe each growing by 15% to 19%. And some of these points were also mentioned after our Q1 results in our investor communication, that Q1 also had little bit extra volumes shipments in the extraordinary situation. In our exports, the share of branded products grew to 41% in H1 versus 34% last year, which is a very positive factor in our view. In terms of product category, insecticides, herbicides, fungicides were most affected by the weather conditions. In Q2, insecticides declined 9%, herbicides and fungicides each declined 6%. However, three categories grew in Q2. Metal phosphides grew by 13%, PGRs by 9% and animal nutrition and environmental health together grew by 18%. So, these three categories were positive. If we talk about our balance sheet and working capital, our balance sheet remained essentially debt free. Cash and cash equivalent and liquid investments were approximately Rs. 2,523 crore as of 30th September 2026, up from Rs. 200 - Rs. 2,113 crore in March 2026. Net cash from operations in H1 financial year '27 was Rs. 447 crore, compared with Rs. 435 crore in H1 2026. Collections were about Rs. 2,231 crore, against Rs. 2,277 crore last year, in a difficult collection environment. This is a reasonable number. Trade receivable at the end of September were Rs. 887 crore, lower than Rs. 903 crore a year ago. Overall, net working capital was 76 days as of September 2026, compared with 55 days in September 2025. This was mainly due to inventory, wherein the inventory days increased from 95 days last year September 2025 to 115 days in September 2026. Two factors drove this number: higher inventory cost, because the prices have increased. And secondly, the volumes were also impacted because of the softer liquidation and sales in Q2. Some bit of inventory volumes were on a higher level as on September 2026. However, we have we are monitoring this situation, and we have started taking corrective actions. And we expect inventory to come down to normalized levels through second half of this current year. On the capex and growth plans, all our announced capex projects are progressing as planned. First, about the Dahej project. We are investing about Rs. 150 crore for development of a greenfield site at Dahej. Most of the projects at the Dahej site are expected for our parent company's future molecules. And these capex plans are on track. We expect the commercial production to start in Q2 financial year 2027-'28, as per our earlier announced targets. The second project which we are implementing is Tarapur, which is also under implementation. During last 12 months, we have announced two capex at Tarapur site. Both of these are Rs. 10 crore each, so together, as a Rs. 20 crore, through which we are going to add three to four additional products in our Tarapur site. And these capex are also in line. And one part of this capex, first part is expected to be completed within this current financial year, and the second part is expected to be completed by end of the next financial year, 2027-'28. And both of these projects
Kunal Mittal (Sumitomo Chemical India Ltd): both Dahej and this two projects at Tarapur continue to be in line with our earlier estimates, and and they should contribute to our company's growth. Some of this growth will also be in domestic market, because some of this expansion, especially in the Tarapur side, is for ex- for domestic Indian market and not particularly focused on exports opportunities. We are also evaluating few more additional capex projects for our parent company's global needs, and we will keep updating you as and when any project is approved by our parent company and our board. Our product pipeline for new innovated molecules from our parent company's portfolio also remain strong. India is now in the same tier to test early stage pipeline product from our parent company, especially in line with trials in Brazil, North America, Europe and Japan for early stage testing. Trials are underway in India for many of this product, and we expect to introduce one or two new products every year and build from this by development of this products working closely with the Indian farmers over next three to five years. With this, now I hand over the call to our CFO, Mr. Anil Nawal.
Anil Nawal (Sumitomo Chemical India Ltd): Thank you, Kunal. And good afternoon, everyone. I'll take you through our consolidated financial performance starting from Q2 FY '27. Revenue from operation was Rs. 907 crore, compared with 930 crore in Q2 FY '26, down by 2%. Gross profit was Rs. 369 crore, down 8%. Gross margin which was 40.7%, down 240 basis point year-on-year due to high cost inventory. However, compared with Q1 FY '27, gross margin improved by 149 basis points. Operating cost was well-controlled. Employee expenses were Rs. 70 crore, and other operating expenses were Rs. 113 crore. Both largely both were largely flat year-on-year. Operating EBITDA was Rs. 187 crore, down 15% with an EBITDA margin of 20.5%, down 297 basis points. The net profit which was 157 crore, compared with 178 crore last year, down 11% with a net profit margin of 17.3%. For H1 FY '27, revenue from operation was Rs. 1,971 crore, compared with Rs. 1,987 crore in H1 FY '26, down by 1%. From a product mix perspective, insecticides remain the largest contributor at 38% of H1 revenue, at Rs. 743 crore, down 4%. Herbicides contributed 25% at Rs. 488 crore, down 6%. Metal Phosphide grew 18% to Rs. 186 crore. The animal nutrition and environmental health grew 14% to 207 crore rupees. PGR were stable at Rs. 179 crore and fungicides declined 7% to Rs. 156 crore. Generic products made up 72% of revenue and speciality product 28%. Domestic business accounted for 85% of revenue and export 15%. Branded product represented 79% of domestic revenue and 41% of export revenue, up from 34% last year. Gross profit was Rs. 786 crore, down 2%, with a gross margin of 39.9% against 40.4% last year. Operating EBITDA was Rs. 419 crore, down 4%, with an EBITDA margin of 21.3% against 22% last year. Profit before tax and exceptional item was Rs. 472 crore, broadly in line with 478 crore last year. Q1 FY '27 included an exceptional income of 26.9 crore. This was the insurance claim received from business interruption caused by fire at our Bhavnagar plant in FY '23. Including this, profit before tax was 498 crore, up 4%. Net profit was 372 crore, up 5% from Rs. 356 crore.
Anil Nawal (Sumitomo Chemical India Ltd): foreign currency. Given continued volatility in the rupee, as we have explained before, our exports and imports are broadly balanced. So, our net foreign currency exposure is largely self-hedging. We also hedge our exposure and do not carry unhedged foreign currency. To summarize, a half year marked by a drought-like monsoon, weak consumption and an inventory cost cycle, SCIL held its revenue broadly stable, kept its H1 margins profile close to historical level, grew net profit, generated healthy operating cash flow and further strengthened its balance sheet. We will take a pause now from our side and request moderator to open the floor for question one-by-one.
Moderator: Thank you very much, sir. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask questions may please press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and one to ask questions. The first question is from the line of Nitesh Rege from Cris Capital. Please go ahead.
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