Agro Tech back in black in 2003-2004

By Our Corporate Bureau | 19 May 2004

Hyderabad: Agro Tech Foods, a 51 per cent subsidiary of global commodity trading house ConAgra, has come into the black and has declared a net profit of Rs 3 crore for the year ended March 31, 2004, against a loss of Rs 11.4 crore the previous year.

The total income of the company rose by 13 per cent to Rs 1,268.9 crore from Rs 1,124.8 crore while the total expenditure grew marginally by 13 per cent to Rs 1,268.9 crore from Rs 1,124.8 crore the previous year.

There was a decline of 35.3 per cent in interest and finance charges at Rs 5.3 crore as compared to Rs 8.2 crore. The profit before depreciation, amortisation and tax shot up 212 per cent to Rs 13.1 crore from Rs 4.2 crore.

Agro Tech has two key businesses  —  branded foods comprising mainly edible oil brands (Sundrop, Rath vanaspati, Crystal) and bulk and processed commodities. The company has shown strong sales growth over the past three years, with net sales moving up from Rs 509 crore in 1999-2000 to Rs 1,113 crore in 2002-03. In the first nine months of 2002-04, sales touched Rs 874 crore, a 9 per cent growth over the corresponding previous period led mainly by the high performing Sundrop edible oil brand.

Despite this, Agro Tech has shown consistently low profits over the past same period. The prime reason being the significant provisions the company has made over the past couple of years towards the ending of its licensing agreement for its Mantralayam unit with ITC. Other reasons have been the steep rise in the price in edible oils in 2002-03 due to which it lost market share in edible oil business to cheaper regional competitors and to soya oil. Apart from this Agro Tech Food's company profit margins have been subject to the vagaries of the underlying commodity price cycles. 

At present competition in the edible oils market is intense, both from national-level players like Adani Wilmar and ITC and cheaper local brands like Gemini and Gold Drop.