Godrej Agrovet shocks market with Q2 profit rise despite crop and poultry setbacks

Godrej Agrovet Limited (GAVL) reported its second-quarter and half-year financial results for FY25, showcasing a solid improvement in profitability amid challenging market conditions. The diversified agribusiness, which operates in Animal Feed, Crop Protection, Oil Palm, Dairy, and Poultry sectors, faced significant headwinds, notably due to erratic rainfall affecting crop spraying opportunities and a volatile global market impacting its subsidiary, Astec LifeSciences.

For H1 FY25, Godrej Agrovet reported revenues of ₹4,799 crore, reflecting a slight year-on-year dip of 5.6%. However, EBITDA rose by 8.3% to ₹456 crore, thanks to strategic cost management and improved efficiency across its core segments. The company’s earnings per share (EPS) also improved year-over-year, marking a 9.8% increase to ₹236 crore in profit after tax (PAT).

Improved Profit Margins in Crop Protection and Animal Feed

The company’s Animal Feed division showed substantial growth, driven by favorable commodity prices and cost-optimization measures. Segment margins increased, with EBIT per metric ton rising from ₹1,531 in Q2 FY24 to ₹1,953 in Q2 FY25. However, the division saw marginal volume de-growth, influenced by lower cattle feed demand, which was dampened by decreased milk prices. The Layer and Broiler feeds, however, experienced sequential growth, up by 10.8% and 5.5%, respectively.

Similarly, Godrej Agrovet’s standalone Crop Protection business improved its margins due to lower doubtful debts and stricter control over fixed costs. However, sales were affected by unpredictable rainfall, which reduced the spraying window for herbicides across key agricultural states.

Expert Analysis: Navigating Volatility in Astec LifeSciences and Poultry

In Q2 FY25, Astec LifeSciences, a subsidiary focused on B2B manufacturing of agrochemicals, struggled with a decline in both top-line revenue and profitability. The cautious approach from contract development and manufacturing organization (CDMO) clients and lower realizations in essential enterprise products led to this downturn. Despite these challenges, a gradual increase in demand has set the stage for sequential improvement.

Meanwhile, the Poultry sector faced challenges due to high input costs and an unfavorable mix. While volumes in the live bird business were down, a deliberate shift towards branded segments saw a modest increase in branded poultry sales.

Dairy and Oil Palm: Consistent Growth and Operational Efficiency

The Dairy segment demonstrated stability with revenue consistent year-on-year and improved profitability due to operational efficiencies and better milk spreads. Meanwhile, the Oil Palm business saw increased realization for both crude and palm kernel oils, which offset a 13% reduction in fresh fruit bunch arrivals. The Government’s recent increase in import duties on edible oils, aimed at supporting domestic production, is likely to benefit this segment in the long term.

B.S. Yadav, Managing Director of Godrej Agrovet, remarked that the company’s improved profitability despite a challenging quarter underscores its resilience and adaptability in adverse conditions. He highlighted the profitability growth across most segments and credited this to effective cost management and market positioning.

Looking Forward: Q3 Projections and Market Sentiment

Looking ahead, Godrej Agrovet aims to capitalize on favorable conditions in its Oil Palm and Crop Protection segments. However, the continued political uncertainty in Bangladesh, where ACI Godrej Agrovet operates, and ongoing fluctuations in commodity prices may present challenges. As of October 29, the market sentiment around Godrej Agrovet’s stock remains cautiously optimistic, with investors focusing on the company’s diversified portfolio and strategic moves to counter volatility in core markets.