Sabero Organics Gujarat (SOGL)

 

Company's Expansion Road Map Overseas Puts It on a Firm Footing

 

THE crop protection major, Sabero Organics Gujarat (SOGL), has done exceedingly well on the bourses following its improved financial performance. Its stock has more than doubled in a span of one year as against 14% growth in the benchmark Sensex.

   SOGL's profit for the fourth quarter more than tripled to Rs 7.1 crore, despite a 3% dip in the net sales at Rs 96.5 crore. Operating margin saw a 300-bps improvement to 15% as the cost of raw material consumed fell 28%. The performance of its domestic business improved in FY10. Domestic sales for the whole year grew 40% to Rs 180 crore representing 42% of the total sales of the company as against just 34% last year. In case of its exports division, the sales also grew in the Americas region while Asia, Europe and Africa reported a drastic fall in sales.

   The proportion of debt in SOGL's capital structure also got reduced during the year on account of a 15% equity dilution over the year and an 88% growth in net profit. Its debt-equity ratio dropped from 1.03 a year ago to 0.71.

   With more than 240 product registrations, Sabero operates on a wide network of distributors and agents in 50 countries. The company has its subsidiaries in Argentina, Europe, Australia and Brazil with Europe and Brazil being the main focus areas to obtain registrations. The company is further expanding its international presence in the geographies of Costa Rica, Venezuela, the Philippines, Guatemala, Cameroon and Argentina.

   The company is currently in the process of setting up an export oriented plant of technical active ingredients at Dahej in Gujarat with an estimated capacity of 2650 tonnes per annum by December 2010. The capital cost of Rs 55 crore will be financed by a combination of $9 million external commercial borrowings and internal accruals. Also, the company plans to increase the capacity of its Chloropyriphos plant by 50% until September 2010. Moreover, it is set to launch two new fungicides and two herbicides in the first half of FY11.

   It has announced a final dividend at the rate of Rs 1.20 per share for the year, which works out to a dividend yield of 1.6% at the current market price of Rs 73. This is 5.5 times its trailing 12-month earnings per share. Given the company's expansion plans, its growth prospects appear attractive for the future.