Monsanto enters transition mode
Monsanto India’s decision to exit the wheat herbicide business is in another step in its ‘transition from chemistry to seeds’ strategy. Seeds now contribute to over half of its Rs 352-crore sales compared with 21% in ’01.
By Ravi Parwan & Ravi Ananthanarayanan, TNN |
Monsanto India’s decision to exit the wheat herbicide business is in another step in its ‘transition from chemistry to seeds’ strategy. Seeds now contribute to over half of its Rs 352-crore sales compared with 21% in ’01.
Over the years, competition from generic players in the agrochemicals market has affected its herbicide business. During ’06, herbicide sales declined by 15% to Rs 167 crore, and profit for the year declined by 5.2%.
It is now divesting its sulfosulfuran wheat herbicide brand Leader for Rs 18 crore to Sumitomo Chemical India. This brand has been a significant contributor to sales and profit since it was launched in 1997 but has suffered in recent years due to generic competition.
Though brand-specific financials are not available, the wheat herbicide segment accounts for nearly a fourth of the total herbicide market. Selective herbicides (of which sulfosulfuran is a part) account for 31% of sales and non-selective herbicides the remaining 16%.
The sale of this brand will thus affect Monsanto’s herbicide segment sales. It is left with non-selective herbicides and rice herbicide (from the selective herbicide category). The former has good growth potential, but the latter has already turned into a mature segment.
ADVERTISEMENT
Nevertheless, Monsanto’s profitability will improve after the sale of this product. Sales during FY07 may get affected, but once the base effect gets over, in FY08, it is likely to improve. Revenues from seeds will become its mainstay. Corn (seeds) is the main category it operates in, and in ’06 volume sales grew by 17.3% but value sales growth was down by 8%. It has invested Rs 48 crore in a new corn drying plant, increasing its capacity. The company claims that margins were still higher than the previous year.
Monsanto expects the business to continue growing due to growing conversion by farmers to corn hybrids and upgradation of existing users to higher yielding varieties.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
