From demand disruptions to dumping from China and inventory unwinding, chemicals, and agrochemical companies, so far in the first quarter of FY24 have flagged off concerns in the industry. There was a hint when global chemical companies started issuing profit warnings and now Indian players have also started echoing the sentiment.
SRF, the chemical giant, reported a decline in its first quarter of FY24 with net profit dropping 41 percent year-on-year to Rs 359.3 crore. The chairman and MD of SRF, Ashish Bharat Ram said there is a lot of inventory unwinding going on globally and this will have some impact on the business in the next couple of quarters.
On the positive side, the longer-term projects remain on track, and we expect to keep our capex momentum intact, Ram said. The company indicated that agrochemical companies are focusing on inventory rationalisation. They are witnessing the rescheduling of purchase orders by some clients.
On fluorochemicals, it said, certain key raw material prices continue to show signs of softening. De-stocking of hydrofluorocarbons (HFCs) will continue in the short-term and China is dumping products across geographies due to weak local demand.
Atul Ltd reported a 37 percent decline in the first quarter of FY24 profits. The company indicated that numbers were impacted due to lower realisation and weak demand in the global market amid geopolitical disturbances.
Subdued global demand and lower price realisation in the crop protection business resulted in a weak performance in the life science chemicals segments, the company said.
Higher inventory and lower capacity utilisation at the customer end resulted in lower sales and subsequently profitability in the performance and other chemicals segments, Atul noted.
Thirumalai Chemicals, the producer of phthalic anhydride, said the company saw dumping of low quality, low price goods from China in Q1 which led to higher imports in the domestic industry, and hence Q2 will be weak like Q1.
However, the company expects Q3 to see some recovery as it expects some government intervention here. Thirumalai Chemicals saw an 82 percent decline in profit after tax (PAT) in Q1 but saw a quarter-on-quarter recovery.
DCM Shriram, the company that has businesses ranging from chemicals to vinyl, to sugar and seeds attributed the first quarter's weakness to the chemicals business.
Overall, profits were down 78 percent YoY led by a 90 percent decline in earnings before interest and taxes (EBIT) of the chemicals business. The company said chemicals and vinyl businesses are facing challenges as a result of global disruptions in demand, supply, and costs.
The agrochemical player Sharda Cropchem reported a loss of Rs 89 crore this quarter and said the revenues have de-grown due to lower sales in Europe and NAFTA region and lower volumes in Europe and LATAM regions on account of high inflation, ongoing recession and adverse weather conditions.
The company experienced a significant decrease in product price realisations, especially in the USA as raw material and finished goods sales prices have reduced substantially. However, they said that the situation is not as bad and they expect recovery from Q3 onwards.
Commentaries from other chemical majors will be important to watch as more earnings are reported.
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