Ladies and gentlemen, good day, and welcome to the Godrej Agrovet Q1 FY 2025 earnings conference call, hosted by Kotak Institutional Equities. As a reminder, all participant lines will be in 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit. Thank you, and over to you, sir.
Thank you, Sejal. Good afternoon, everyone, and thank you for joining us on the Godrej Agrovet Q1 FY 2025 earnings conference call. From the company, we have with us Mr. Nadir Godrej, Chairman of the company, Mr. Balram Yadav, Managing Director, Mr. S. Varadaraj, Chief Financial Officer, and Mr. Anurag Roy, Chief Executive Officer of Astec LifeSciences. We'll begin the call with brief opening remarks from the management, following which we'll have the forum open for an interactive Q&A session. Before we start, I would like to highlight that some statements made on today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared earlier. I would now like to invite Mr. Nadir Godrej to make the initial remarks. Over to you, sir.
Good afternoon, everyone. I welcome you all to the Godrej Agrovet earnings call. Godrej Agrovet reported a strong growth in profitability in quarter one, fiscal year 2025, despite a marginal decline in revenue. Profits before tax, excluding non-recurring items, improved by 36% to INR 169 crore as compared to INR 124 crore in quarter one, fiscal year 2024. The company reported consolidated revenue from operations of INR 2,351 crore in quarter one, fiscal year 2025, and again, INR 2,510 crore in quarter one, fiscal year 2024. The growth in profitability was primarily driven by robust volume and improved realizations in the domestic Crop Protection business and margin expansion in the Animal Feed and Dairy businesses. Coming to the key financial and business highlights of each of our business segments.
In Animal Feed, the segment margins improved sharply from 4.2% in quarter one, fiscal year 2024, to 6.8% in quarter one, fiscal year 2025, on account of favorable commodity positions. Further, EBITDA margin improved significantly from INR 1,443 in quarter one, fiscal year 2024, to INR 2,258 in quarter one, fiscal year 2025, and also sequentially. However, volumes were impacted due to subdued milk prices and lower placements. Our Vegetable Oil segment revenues in quarter one, fiscal year 2025, were impacted by lower Fresh Fruit Bunch arrival and lower opening stock in quarter one, fiscal year 2025. Further, our segment margins were impacted due to a lower oil extraction ratio. The standalone Crop Protection segment results with a strong growth in quarter one, fiscal year 2025.
Our segment margins improved significantly from 32% in quarter one, fiscal year 2024, to 45% in quarter one, fiscal year 2025, primarily due to higher realization in herbicide and pesticide categories. Also, our segment revenue improved due to volume growth in plant growth regulators and herbicide categories and improved pricing across categories. Astec LifeSciences continued to experience pricing pressures and demand headwinds in the enterprise products business, which adversely affected top line and margins. This also necessitated an inventory write-down in enterprise products. Furthermore, deferral of CDMO orders contributed to margin compression. In quarter one, fiscal year 2025, our Dairy segment demonstrated robust margin expansion, with EBITDA margin improving by 490 basis points. The significant enhancement was primarily driven by operational efficiency gain and an improved milk spread despite a flat top line.
The cadence of value-added products has improved from 36% of total sales in quarter one, fiscal year 2024, to 42% in quarter one, fiscal year 2025, reflecting our successful portfolio optimization efforts. The Poultry segment recorded a decline in revenue, primarily due to lower volumes in the live bird business, as we continue to focus on branded business and reduce our exposure to live, to the live bird business. GAVL's joint venture in Bangladesh, ACI Godrej, recorded a revenue decline of 13% year-on-year in quarter one, fiscal year 2025, due to volume contraction and pricing pressures across categories in the backdrop of a challenging political and economic environment. That concludes our business and financial performance update for the quarter. With this, I close my opening remarks. We will be now happy to answer your questions. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity, and congratulations on a good set of numbers. First question on the Astec part of the business. You know, if you can share your thoughts on the enterprise sales, you know, the scenario, the macro over there, are we seeing, still seeing pricing pressures, as well as outlook on the CDMO business there?
So I'll take that question. This is Anurag Roy. Thanks for the question. So talking first on the enterprise business, as we got into quarter one, we saw significant headwind continued in the quarter, as you saw it in the numbers as well. So what we are seeing in the enterprise business or the portfolio where we play in, primarily the triazole portfolio, is, on some of the products, we are seeing demand being firmed up. But for the others, we still are waiting for significant demand uptick to come back. If you look at geographically, demand from the domestic markets has started firming up, and we are also seeing some prices to firm up.
But we continue to experience challenges in the export markets, wherein the price points are still very low, and we have also seen continued, you know, dumping of products from the China market. So that's the scenario on the enterprise product. We feel that the demand should likely be back in next quarter or two quarters, but prices, specifically in the export market, might take a few more quarters to firm up as the supply-demand balance evens out in most of the products. On the CDMO side, we continue to have a run. Obviously, we are growing from a smaller base, and each year we are growing by almost 60%-70% year-on-year, and we hope to maintain the same run rate as we get into this year and the following years.
So Anurag, just to follow-up there, one on the CDMO bit. We were give and take around INR 270-odd crores, as well as the new products put together. How quickly do we think, you know, we can scale it up to the full potential for the existing capacity over the next maybe, you know, 2-3 years? And secondly, a follow-up on the enterprise business part. While pricing is again, you know, not exactly in our hands, but from a volume growth recovery perspective, any timelines you can share there?
Right. So first on the CDMO, part of the question, we have invested to increase the capacity on the herbicide plant, which is likely to be commercialized this quarter. And, as such, any ramp-up in the CDMO will cater to the second herbicide plant, which we will be commercializing. And as I mentioned earlier, since we were growing from a smaller base, we are expecting, you know, 50%-60% growth year-on-year, and we want to maintain that run rate at least for the next two to three years. So that's on CDMO. On the enterprise side, as I mentioned, the demand is likely to come back, or we are seeing some green shoots in the demand starting this quarter, specifically from the domestic market.
I would say, you know, by end of this year, the demand is likely to come back fully, and the prices might take another quarter or two to firm up. That's how we are seeing on the enterprise side.
Sure. That's helpful. Just another question on the palm oil plantation side. You know-
Yeah.
Slightly weak numbers, and you did mention, you know, OERs being slightly weak, along with lower FFBs. Any thoughts if, if that, you know, weakness in OERs is still continuing, you know, in, in the last couple of months as well? And how does the full year's production look like?
Let me tell you that most of our businesses suffered because of excessive heat during May, June. That is one of the reasons so we believe that whether it is Animal Feed season or it is the Milk season or it is the Oil season, everything is delayed by a month at least. If you ask me today, I think the kind of uptick we wanted to see in our FFB production has not happened. It is not something which we have noticed only this year. Every two, three years, there is a year when this happens, and the season is delayed, and it gets into November and December also, instead of getting over in October and November.
So our sense is that based on our past experience and data, it should be another year when the season will be extended. One of the reasons for low OERs in the nearer months is that we had excellent rains in July. But when it rains in July, we also pay for water because it is paid on weight of the fruits and then the oil content of fruits. So we see this as a normal phenomenon. But water is very important, so we believe that the productivity will go up and production will go up in the coming months. So we have not given up. I am very sure that the numbers will be definitely achieved in the FFB production.
In case we follow the last, last few years' pattern, the OER improvement should also start from August onwards, and we should start growing up in OER also. So I have still not given up. I strongly believe that, definitely we will achieve last year's number somewhat.
... Sure, well done. That, that's helpful. I'll get back into the queue. Thank you.
Thank you. The next question is from the line of Sravan Borra , who is an individual investor. Please go ahead.
Hi, thanks for the opportunity. My first question is on Astec LifeSciences again. So, I hear your comments, Mr. Roy. I just wanted to get a little bit of clarification. First was in the prior quarter, we had guided that the new high margin molecules that we had launched to-- for the ideal enterprise capacity, those would start showing some fruit in the July to September period. So where are we on that? Is my first question.
Yep. So, on the enterprise side, there's a new product which we have launched at a very fast-paced basis on the development timeline, for which the volume has started to go in the export market from Q4, last year quarter. So we had the volume, from that product, volume sales from that product in Q1 as well, and we'll continue to have that in the subsequent quarter.
Okay.
So-
So-
Yeah. Yeah.
So just to clarify, so if you had that sales in Q1, then the, like, the other enterprise business, like, was close to zero, like the older one? Because, overall in enterprise-
Yeah, so for the other enterprise business, two things happened. One, clearly there was no profitability generated from the other enterprise business. Two, there was a lot of sales which were booked for the export market, which was not realized in the first quarter. So the impact from the revenue perspective will start kicking in from Q2. So that's on the enterprise side. On the CDMO side, actually, few of our project or the volume sales were being deferred to the subsequent quarter because of the supply chain issues on some of the raw materials coming in from China. So, we were not able to, you know, realize the revenue in Q1, because of lack of availability of container coming in from China.
Right.
Those were the two primary reasons for muted Q1 numbers.
So just, that would be a deferral, so that would come up in 2Q. So could you just quantify the number for CDMO and enterprise separately?
We typically, I think, we maintain our guidance on the CDMO revenues for the full year. As I have repeatedly mentioned, we should not look at CDMO revenues on quarterly basis. So we maintain the same guidance that from last year, INR 260 crore-INR 270 crore number, we'll continue to grow that numbers by 60%-70% this year, and we are well on target to achieve those numbers. On enterprise, you know, it's very difficult to put a number or a forecast, but since we have launched some of the new enterprise projects as well, we believe at a portfolio level, we'll be able to utilize the capacity fully for the remaining quarters and appropriately make the revenues and profitability.
Mm-hmm. But our traditional triazole products, I think in one product the volumes are back, but the pricing is a problem. In the other product, which is propiconazole, neither the volumes are there nor the prices well. So I think that still is baffling us because that is one product which used to be very fast-moving for us. So does the world still have inventories or what has happened? Because none of the countries have banned that product.
Yes.
So I think we are watching. I must also say for everybody, let me just tell you that the line of sight is very limited in our enterprise products, particularly the traditional ones, because we really do not know what is happening.
Right. So, Mr. Yadav, you had mentioned in the last 4 Q call that for Astec, we would probably be looking at Capex in 3 Q next year or towards the end of FY 2025. So any, any, any thoughts around that? What - any, any change in thought around that, from previous quarter?
So definitely there is a big change. The discussion here is that, have we run the full life cycle of some of our old triazole products? And in case we get an idea that rather than setting up new Capex, we might modify some of our old plants to fit in some new molecules which might come, which may defer the investment by another year or year and a half. So I think, but we still don't know. It will take us another 3-6 months to figure that out, but at least as of now, we are not committing any Capex in Astec LifeSciences other than debottlenecking, quality improvements, projects and some environmental, control investments. That's all.
The other side, too, commercial.
Commercial, yeah, it is almost complete since money has been already invested.
Got it. And, my second question is on Agrovet. So I just wanted to understand from you, post this increase that we are doing our stake in our JV with Godrej Tyson, what are the long-term, any outlook or thoughts behind that, and how we think about the business over 3-5 years now?
... Sure. So I must say that this was one of the very fruitful partnerships we had with Tyson. I think they brought in lot of knowledge to our team in chicken, in rearing chicken, and in food part of the business. So I think they are the leaders in the world, and I think the kind of up-gradation of technology and skills they did is commendable. But, you know, all joint ventures have a limited life, and we felt that it is a too big a company, and the business in India was too small for them. And, you know, India is a land of opportunities, but it requires quick decision-making, investments, both in brand building, in people, as well as in equipment and facilities. And I think in a joint venture, the speed is always a casualty.
We also felt that we would be better off managing it alone, and that is what I would say motivated us to go for acquiring 100% stake in this business. Now, having said that, apart from the opportunities which we can capture in this business because of agility and investment, et cetera, the other freedom this thing gives us is our ability to do M&A or restructure this business, take portfolio decisions in future. So I think not only gives us an opportunity to build this business, but also to restructure this business if required in future.
Got it, sir. Got it. And just one more question, sir. On Agrovet, we have discussed in the past if the business can actually look forward to any alternate structures for the business. But when I go through the annual report, we highlighted how we, we drive cross-business synergies and knowledge in the business. So any, any, any thoughts, update on thoughts around that, from what we have discussed in the last two, two quarter goals?
So I think, we keep on exploring those opportunities, in terms of portfolio decisions, that is point number one. And one of the portfolio decisions we took and demonstrated also, that we are seriously looking at these, things, to build more flexibility in system, that is. The other thing about cross synergies, definitely these cross synergies are very, very useful. We have strengthened them. We keep on working on them. But I don't think that large portfolio decisions can hamper this, because ultimately, whatever we do, these businesses will always remain in the Godrej fold. And definitely, as each company can benefit from what other companies do, and we will see more of it, happening in future also.
Thank you. The next question is from the line of Raj Rishi from DCPL. Please go ahead.
Yeah. Any comments on recent developments in Bangladesh, how it will impact the joint venture there?
No, it won't impact the joint venture because we are both committed, because it's a wonderful business we have built. We are growing. When we went there, we were 15th Animal Feed company. Today, we are the second Animal Feed company and growing faster than the number one company. So it's a very profitable business, always delivering very high dividends.
Okay.
However, the political developments there are unfortunate, and I must say that definitely last one week was very, very difficult for us and our employees, because we have several expats with families there, and they were not able to move houses. And, you know, whenever something like this happens, I think the expats, particularly Indians, are easy targets. So we were very, very disturbed. But of course, yesterday's development has brought some sanity. And our reports are saying that at least Dhaka is very peaceful, and rest of the country is coming back to normal very quickly. My sense is, within a day or two, we will start our factory. And we have a meeting post this, where we will assess the situation and take a decision, if we can start our factory, because they got closed day before yesterday.
The other thing I must say is that we are classified in essential services there. So I think the government, as soon as the new government takes charge, and somebody responsible is there, they will definitely ask us and provide us all support and protection to start the factory, because animal feed is as important as food, because animals would be without feed for some time. So I think we will get back to normal very quickly, particularly in this sector.
Hello? Hello.
Yeah.
Yeah, it just got disconnected for a while. Can you just repeat the last minute?
I think we are part of the essential services.
Okay.
Government, as soon as there is one, they will quickly help us and protect us to get back to normal. This is what has happened several times in the last two decades also; we have been here. My sense is, in a day or two, I think we'll come back to normal.
Net-net, financially, you don't think much of an impact would be there?
It may be an impact this month.
Okay.
But, I'm saying that ultimately the birds are still there, the animals are still there.
Okay.
I think, things will limp back very quickly.
Okay.
In a week's time, I think we will be, it will be business as usual, unless and until there is a new development which we don't know.
Sir, I just couldn't hear what you said about Godrej Tyson. You're talking about M&A, it will further enable possibility?
Yeah, yeah. I'm saying that with a partner, there was always difficulty in restructuring, no? Because... There are always interests of both has to be kept in mind.
Okay.
So whether it is investment decision, whether it is restructuring decision, whether it is talent decision, whether it is investment in branding, et cetera, all these decisions will become much easier when you own something 100%.
Okay. So is it the Godrej Agrovet vision to make it into what you're doing right now?
Well, I think you will see increased activity on branding.
Okay.
So definitely, I think we are beefing up talent also.
Okay.
And, so my sense is that all decisions will be made in this room. That is a big plus for any of the businesses we run, because this requires agility, this requires quick decisions and quick changes. India is not a country where you can wait for two, three quarters to change things.
That's true. And, so like, this present recent budget had a lot of stuff on agriculture, like AgriStack and all that. So can any comments on how that will impact the business? Most probably positively.
AgriStack is going to be revolutionary in the long run.
Okay.
Let them get the data first, and I think whatever pilots we have in 2-3 states has been very encouraging. Eventually, they want to bring down 6 crore farmers under AgriStack, but initially that data may not be available to the private sector, but eventually it will be.
Okay.
And my sense is that I think, the whole sector will change.
I know.
With so much information we will have about each farmer, crop, land, et cetera. So I'm saying that it will be a technological revolution. So it is a, it is a top class KYC for our farmers, and I think the companies will benefit from that.
Thank you. The next question is from the line of Rikin Shah, from The Boring AMC. Please go ahead.
Hi. Good afternoon. My question is for more on the Astec part. So this quarter we have seen loss at a gross profit level, I would say. So does that mean we have seen final stretch of inventory liquidation there?
Yes. We have taken inventory write-off in Q1 to the tune of almost INR 18 crore. We brought all the inventory to the existing pricing level in the market. So any kind of uptick in prices as we get into the subsequent quarter will have a positive impact on our profitability.
All right.
Let me also tell you that INR 4.5 crores of credit notes were also given because the prices fell so sharply in the past that whatever we had sold at high price also had to be repriced at lower price.
So, yeah, like from Q4 last year to Q1, we have also seen a deterioration in at least export prices by 10%-12%. So that has also impacted our write down for the profitability.
All right. Because I think, I think this has been a pertinent question since the last year. So in Q2, I remember asking this question myself, and that time you had mentioned that almost 40%-50% of inventory or high-cost inventory was depleted. So from then on, up until now, you know, it has been a long journey. So then, can we finally say that, you know, next quarter onwards, we should at least not see a gross level loss in the enterprise side?
Yes. See, for most of those products, Rikin, we were able to liquidate the inventory, but, for one product, which I think you are aware of, which Mr. Yadav was also talking about, propiconazole, we were still sitting with some of the inventories, where we are not seeing any demand even from the domestic or international market. When I say demand, I'm talking about any significant demand. It's moving in few tons, and we were anticipating that by this quarter or next quarter, the demand will come back and the prices will not go down significantly, but we saw deterioration in prices as well, and very meager demand coming up in Q1, hence we had to take the write-down. But now our inventory situation is also way less on that particular product.
So the remaining those products, we have almost balanced out. So as you rightly mentioned, in the subsequent quarters, we should not see any further impact on the inventory write-downs.
All right. Thank you for, yeah, mentioning that. Additionally, like, since you mentioned about, you mentioned about whether, you know, the triazoles have run out their life cycle or not, you all are evaluating that, but I think the current situation, the supply far outstrips the annual demand in most, most of the triazoles. So would it not be sort of an easy decision to pivot at this point?
Sorry, not an easy-
Pivot.
Pivot. Okay.
Exactly.
So that's what we are doing. So you are right. So from In China, we are seeing huge amount of overcapacity or increased supply-side situation, and that's why while the demand is back, we are not seeing any firming up of prices on most of these triazole products. And as a result, what we are doing, which Mr. Yadav was also saying, the existing capacity which we had for the triazole products, we are also rechecking some of those capacities to work around the other intermediates and CDMO products or some of the other new products.
... and hence balancing out the capacities from our historic those product lines. So we are working around that balance so that our capacities are fully utilized to the extent possible. And, you know, we require very minimal CapEx as our investment as we breathe through these tough situations.
All right. Got it. Just lastly, touching upon what you already mentioned. So you did mention there is a deferral of orders in CDMO. So because of these, you know, supply chain issues, the Red Sea crisis, I hope we have not lost out on any of these business in CDMO, and it's just a deferral.
No, no, it's, it's just a deferral. So as I mentioned, for the year, our guidance stays the same. It's just the deferral of the business, which has happened in Q1.
All right. All right. That's it for now. Thank you.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Resha Mehta from GreenEdge Wealth Services. Please go ahead.
Yeah. Thank you. So my question is specifically on the cattle feed business. So you've mentioned that the volume growth is impacted due to subdued milk prices and lower procurement. So, does this basically imply that because... So farmers have started neglecting the health of their animals because the milk, the raw milk prices have been soft for a very, very long time?
Not health, but definitely nutrition. So I'm saying that, that decision is very quick when the milk prices start falling and they see their profits going down. Definitely, they try and start cutting costs, and the first thing to be done is that they start cutting costs in the quantity of feed. So that definitely happens when milk prices come down. But I'm glad to state that milk prices, particularly in Maharashtra, have gone up again. And, definitely we are seeing a little bit of uptick in milk, largely because of seasonal change, then this is the milk season which is starting. But, you're absolutely right that there is an impact on quantity.
Right. So any specific geographies, states that you would like to call out where, you know, the farmers have started, you know, ignoring the nutritional needs of their animals? And also, you said that there has been a dip, so, you know, so this volume, the growth of 7.5% is attributed only to that or, you know. So what share of this volume growth, volume would essentially be cattle feed?
So cattle feed, degrowth is 4.5%, about 4%. Our big degrowth is in broiler feed. And I must tell you that you must look at broiler feed along with Godrej Tyson Foods Ltd. Because, because of the heat, there were no broilers, so who will we sell the feed to? But the big impact is in the uptick in the broiler feed prices, which benefited the Godrej Tyson Foods. So that, I think, is a very simple analysis you can do and figure it out, because when one sector, section does badly, the other section improves. Because the only, only way we will sell less is when there are less birds.
Right. And on the question on which state specifically for cattle feed, where we are seeing a-
Cattle feed, I think, if you ask me, this, impact has been all round, but the major impact was Maharashtra, but I think that has certainly, started improving, particularly from the month of July. Hmm.
Right. Since when would we have seen this trend of, you know, farmers kind of, reducing the feed for their animals? It's been, like, this quarter and the quarter before that.
I think this is a normal tendency. They bring down the input costs, and this is one of the ways of doing it. The other way is also they bring down the silage which they buy from themselves and, turn to traditional greens and dry powders. So I think, you can always-- They are entrepreneurs, so they keep on taking those decisions, which may not be, good in the long run health of the animal, but provides them some relief in the short run.
Right. Right. Right. All right. That's it. Thank you.
Thank you. A reminder to all the participants that you may press Star and One to ask a question. The next question is from the line of Abhishek Anand from Centrum Broking Ltd. Please go ahead.
Hello, hello. Hello?
Yes, sir.
Yes, please.
Yes, yes. So, hi, sir. I just wanted to get the knowledge on the margins, which has increased in this quarter. So this has gone up to 10%. And, so how do you see this, is this a sustainable margin in the coming 2-3 quarters, or once again, 1.9%?
Which margin? Feed margin?
The OPM margins.
Sorry?
The EBITDA margins that have gone up to 10%.
EBITDA margin?
Yes, yes, yes.
This has been extraordinarily good quarter.
Right.
So my sense is that last year we had a margin of 8.2%; this year, 10.8%. I feel that anything between 9%-10% is something which we, we, we think we will be able to maintain in future big quarters.
... Okay, so in the coming quarters, we can see the margins to be around 9%-10%. That's right? Hello?
Yeah.
Anything in between of 9%-10% in the coming quarters, right?
Yes, please. Yes.
Okay. Thank you so much.
Mm-hmm.
Thank you. The next question is from the line of Guneet Singh from Carbon Check (India) Private Ltd. Please go ahead.
Hello, I'm Guneet.
Sorry.
Yes, sir, you're there.
Yes, so I'm Guneet from Carbon Check India. I would like to understand the trends in the poultry division, Tyson. What's the main reason for falling revenues, and what kind of trends are we seeing in the poultry sector, given that chicken prices are going down below the prices and maize prices and the feed prices are going up so, I mean, what kind of trends are we expecting in the sector in terms of margins in the coming quarters?
Okay. So the revenue is going down because of conscious decision to reduce the live bird, which was a commodity. And you will see that increasing salience of branded products as quarter goes by will increase because that is the main focus. Because we don't want. We want this business in three, four quarters to reach a level where the live bird prices don't make such a big impact. However, having said that, they will definitely make an impact, but not the impact which they used to make it in past. So you will see, I think the thing to watch is the salience for branded business in the total turnover. If that is increasing, then we are on good footing.
The second thing is that we are going to have concentrated efforts on Godrej Yummiez and Real Good Chicken business, and that will be our margin earner in future. I think you will see increased activity in improving business hygiene, number one, margin expansion, number two, and branding, number three. So I think that will be the focus of this division in future. As far as corn prices are concerned, definitely the live bird cost will go up. But live bird costs will not go up in the same proportion as the corn price, because if you see, our inventories are very high, and most of the inventories are in Godrej Tyson Foods Ltd and the Animal Feed division, where we are already bought in October.
All right, sir. If you look at the overall industry trends, I mean, in the poultry sector, should we—I mean, is it that the prices are not increasing as much as the cost of producing a chicken is increasing?
So the chicken, this is a bad quarter to ask that question, because prices have been falling for the last 15 days, and, you know, Sawan is one very poor consumption months. But, my sense is that they will start rising again, once October comes, like all years, and you will have three, four months of good prices again till January, and then there'll be a lull for a month or two. So I think this is the cyclicity which this industry has been following, for the last so many decades, and I think that will continue. The only good thing is that this year, probably, we don't have perfect data in this industry, but what we are seeing is industry players are also managing their supplies and their inventory depending on this season.
So we will see that prices may fall, but they will not fall the way they used to fall, fall in earlier years, that they used to be at 60% of cost of production or 50% of cost of production. So I am hopeful that this quarter will not be as bad as other Sawan quarters, but definitely it will be subdued.
All right, sir. Thank you. Just to rephrase what you said, so basically we're looking at this normal seasonality, and, things would be better only in terms of margins overall, if you look at it for 2025 as compared to previous times.
Yeah, yeah, yeah. So one reason for margin expansion in poultry will also be benign raw material prices. So even if corn has increased for some time, but if you see protein, particularly soya, maize, and DDGS, because of huge increase in production of ethanol. So the protein prices are very, very, I would say, at a very comfortable level. They are much lower than last year.
All right, sir. Got it. Thank you very much.
Sure the best.
Thank you. The next question is from the line of Abhijit from Kotak Institutional Equities. Please go ahead.
Yeah, thank you. So just a couple of questions on the key segments. So in Animal Feed, we've seen this very strong margin performance, which you clarified is because of the favorable commodity cost positions you have. So will this continue through the rest of this year? And how should we think about the margin profile in this segment going forward?
I think it was INR 2,200 EBIT per ton. Correct?
Yeah.
I think we should be able to maintain it around 2,000 in rest of the quarters, because I'm very confident, because we are, we are, definitely, covered as far as major raw materials are concerned, where most of the movements take place during the season. And I believe that our prices are not going to increase in season also significantly because corn is only area where we have seen inflation, and there is an 11%, growth in corn area. That is point number one. Point number two, the rain has been extremely good. If it starts tapering in a week or 10 days' time, we will see a bumper corn production. So it should take care of the increased demand of starch industry, feed industry and the ethanol industry.
My sense is that pretty much everything is under control, and everything is looking, pointing towards that.
Got it, sir. And in the domestic Crop Protection business, where again, the margins are extremely robust. And I know you've mentioned in the presentation that it is driven by higher realizations across product categories. So again, how should we think about the margin profile there going forward?
I think, quarter one and some part of quarter two is always our in-house products. And then we will start now quarter two, second half, and quarter three will be our in-licensing products, and some in-house products like Double and Combine . So my sense is that, our changing strategy and improvement in our in-licensing products will definitely make sure that we come to similar margin profile as last year. Having said that, I must say that our, in-house products have performed very well in past four months, but due to incessant rain, we are keeping our fingers crossed, in the late season liquidation, which used to be very high, is not showing that number. But definitely there is a lot of opportunity with Rashinban, with, with Gracia, et cetera, later in the season.
My sense is that the kind of product range we have and in the crops we have, which are very remunerative crops, particularly vegetables, we should be able to make up for in case there is a slip up in our final products in quarter two, first half. Mm-hmm.
Understood. And, just one thing for Anurag on the triazoles. There was this recent news, piece of news from China about the closure of some 1, 2, 4-triazole facility. So is that potentially a positive for the triazoles business?
So we were tracking that news closely as well. There was slight disruption in terms of shipment of raw materials coming in from China, but that problem was very short, I would say. So we are not seeing any delays in terms of raw material shipments coming from China.
Yes.
What we were anticipating, that it might have a significant impact on the prices, but we haven't seen any of that panning into the market.
Okay, got it. Just one last thing. On, on the CapEx front, you announced this INR 110 crore CapEx project for Animal Feed in Maharashtra. So is this, if you could meet the growing demand for our key brands, is that the thought process there? And from the overall company's perspective with regard to that, what sort of CapEx number could we work with for fiscal 2025?
So this INR 110 crore plant, the sanction has been taken in anticipation, because it takes us normally two years to complete one plant. So we thought that it is good if we take this sanction, so that we have the flexibility of starting it anytime, because we already have 11 acres of land at a suitable place in Maharashtra. That is point number one. Point number two is CapEx this year. Definitely we are going to have one more refinery in OPP, and with its attachments, et cetera, INR 30 crore. Apart from that, there is capitalization of herbicides. Money is already invested, 99% of that, and then routine CapEx. Everything will be managed through internal accrual easily.
Understood. Thank you so much, sir, and wish you all the best.
Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we'll be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.
On behalf of Kotak Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.