National Fertilizers Limited has reported a decent rise in sales as well as profits during first quarter of the current year due to a reasonably good monsoon season in India.
The company's profit grew by 269% YoY and stood at Rs.108.31 crores during the first quarter as against loss of Rs. 64.07 crores during the same period last year.
Total sales also rose by 8.74% YoY and reached Rs.2837.90 crores as compared to Rs.2609.82 crores last year.
Despite a robust performance in first quarter, the company is facing liquidity constraint due to delay in the release of fertilizer subsidy by the Government owing to inadequate subsidy budget. The unprecedented higher borrowings to manage working capital requirement has led to the incurrence of huge interest cost to the company.
The company recently said that delay in execution of the on-going projects of the company due to Covid-19 has led to time and cost overrun impacting adversely on the financial performance of the company.
Execution of the company's Joint Venture Urea project namely RFCL (Ramagundam Fertilizers & Chemicals Limited) has got delayed due to Covid-19 causing extra equity burden on the company due to cost overrun and loss of income from the marketing of Urea as 100% marketing rights are with NFL.
Commissioning of the energy-saving projects at Units, ear1ier scheduled in March to May 2020 has been rescheduled in September/ October 2020 and March/ April 2021 due to lockdown triggered from Covid-19.
Urea production remained uninterrupted during the lockdown as all the five plants of NFL continued operation at full load except for a reduction in load for few days due to limitation of bags with minimum manpower required to operate the plants and after taking all precautions required in the lockdown guidelines.
The production levels could be sustained due to sufficient inventory of raw material and other intermediates like chemicals, consumables and available unfilled capacity of silos for stocking the final product urea.
However, the company faced many challenges during lockdown like restriction in the evacuation of Urea from the plants mainly due to non-availability of adequate labour and trucks arising due to stringent restrictions imposed by the local administration.
The company faced difficulty in movement & availability of inputs like neem oil, PP thread and chemicals (Sulphuric acid, caustic lye, liquid chlorine, cooling water chemicals etc.) due to shortage of trucks and operational difficulties faced by the suppliers due to shortage of manpower, raw material and non-availability of trucks for movement.
Supply of bags was most affected as a result NFL was constrained to reduce the plant load of some of its plants for a few days resulting in loss of production. As of now, the situation with respect to bag availability is yet to normalize and bag supplies continue to remain constrained.