Financial Highlights

The key financial highlights based on the historical financial information of the combined financial statements of the Company for the Financial Periods Under Review are set out below:

• The revenue rose from RM 108 million in FYE 2021 to RM 188 million in FYE 2022, but dropped to RM 151 million in FYE 2023, mainly due to lower ASP and reduced fertilizer sales volume driven by declining input and fertilizer prices amid global economic adjustments.
• The gross profit margin decreased from 18.8% in FYE 2021 to 17.9% in FYE 2022, due to rising input material prices, which increased the COS per tonne of fertilizers. It then rose to 18.20% in FYE 2023.
• The PAT margin increased from 7.0% in FYE 2021 to 7.8% in FYE 2022, and fell to 6.6% in FYE 2023.
• The gearing ratio is 0.90 in FYE 2023, which is above the healthy range of 0.25 - 0.5, indicating higher liquidity risk exposure.

Major customers and suppliers

Major Customers

The company group’s top 5 major customers and their contribution to the revenue for FPE 2024 are as follows:

The company is not dependent on any single customer as there were no any single customers that contributed more than 10.0% of its total revenue.

Major Suppliers

The company group’s top 5 major suppliers and their contribution to the purchases for FPE 2024 are as follows:

The company is not dependent on any of its major suppliers as the purchases are commodity input fertiliser items that can easily be purchased from other suppliers.

Industry Overview

Fertilisers are a concentrated source of plant nutrients to improve plant development, growth and health, as well as crop yield and quality. Although plant nutrients exist naturally in the soil, they may be deficient in some nutrients or some nutrients are not in a form readily absorbed by plants. As such, fertilisers are used to correct nutrient deficiencies and in commercial cases, they also accelerate plant growth and increase crop yield and quality.

Nutrients are categorized as macronutrients and micronutrients. Macronutrients are nutrients that are required in relatively large quantities compared to micronutrients and are segregated into primary (N, P, K—known as NPK fertilizers) and secondary macronutrients. Micronutrients are essential nutrients needed by plants in relatively smaller quantities by plants compared to macronutrients. They are also referred to as trace elements or trace minerals. Micronutrients, among others, help in chlorophyll production to aid in photosynthesis, plant respiration to metabolise sugars to generate energy for plant growth and the formation of cell walls.

Fertilizers are classified into inorganic, organic, and semi-organic fertilisers.

• Inorganic fertilisers, also known as mineral or chemical fertilizers. It is derived through chemical processes or reactions between minerals and chemicals to create compounded forms of desired nutrients. It allows precise nutrient blending and is readily absorbed by plants.
• Organic fertilisers are organic matter derived from plant and animal by-products, including agricultural waste such as oil palm empty fruit bunches, fronds, and animal manure. Organic fertilizers are often used in their natural form, the composition and ratio of nutrients are not consistent and will vary depending on the sources, organic material type, and food consumed by the animals. Besides, organic fertilisers require microorganisms to break them down into absorbable forms, making them less efficient compared to the direct availability of nutrients using inorganic fertilisers.
• Semi-organic fertilisers refer to the combination of organic and inorganic fertilisers. It combines the benefits of organic and inorganic fertilizers, improving soil health while ensuring nutrients are readily available for plant absorption.

According to the research from Victor Factor, between 2021 and 2023, the apparent consumption value of fertilisers declined at an annual average rate of 2.1 %, attributed to, among others, the overall decline in fertiliser prices in 2023 which fell from an average of USD700/tonne, USD772/tonne and USD863/tonne in 2022 to USD358/tonne, USD550/tonne and USD383/tonne in 2023 for N, P and K fertilisers respectively. In H1 2024, the apparent consumption value of fertilisers declined by 22.7% to RM2.7 billion compared to RM3.5 billion in H1 2023.

The key risks and challenges in this industry:

• The industry players are exposed to the risks from price fluctuations and the supply of natural gas for ammonia-based fertilizers
• The industry players are exposed to the environmental impacts of fertilizers

Future plans and strategies for CROPMATE BERHAD

A summary of the company's business strategies and plans is set out below:

1. The company intends to upgrade the production process

• Automated weighing process

​2. The company intends to expand its facility and equipment

• Setting up R&D and test laboratory
• Purchase equipment and vehicles
• Acquisition of our existing factories

MQ Trader View

Opportunities

1. The company has a large customer base from diversified sectors to reduce customer and sector dependency
2. The company has in-house technical expertise to develop formulations to meet various requirements of their customers and target markets
3. The company offers conventional and specialty fertilisers for product diversity to cater to the different requirements of its customers

Risk

1. The company is dependent on the performance of the main user industries mainly oil palm plantation and the performance of the trader customer group who are the company intermediaries
2. The company business and financial performance may be subjected to unfavorable price fluctuations of key input materials where a sustained high price may affect the demand of our fertilisers

Click here to continue the IPO - Cropmate Berhad (Part 1)

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