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Thursday, 01/03/2008 12:02:38 AM

Thursday, January 03, 2008 12:02:38 AM

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United Phosphorus looks at buys to sustain growth

http://in.reuters.com/article/businessNews/idINIndia-31104620071224

Mon Dec 24, 2007 3:56pm IST By Prashant Mehra and Bharghavi Nagaraju

MUMBAI (Reuters) - Agrochemicals maker United Phosphorus Ltd is eyeing acquisitions in Asia, Latin America, eastern Europe and Africa to expand its global presence, a top official said on Monday.

The firm believes the agrochemicals industry is on the verge of consolidation as small players find it difficult to sustain operations and large players push for higher growth.

"We are agnostic to the size and geography of an acquisition," Chief Financial Officer S Krishnan told Reuters in an interview. "We are as passionate in working on a $10 million deal as we are on a deal worth a couple of billion dollars."

Earlier this month, Australian farm chemicals maker Nufarm, valued at $2 billion, denied a newspaper report that the Indian firm was in talks to buy out the company.

In October, United Phosphorus unsuccessfully bid for Japan's Arysta LifeScience, which was ultimately snapped up by European private equity firm Permira with a $2.2 billion bid.

However, analysts believe there is a possibility United Phosphorus may enter into an alliance with Permira to help manage Arysta's operations. Krishnan declined comment.

ACQUISITION VALUE-ADDS

United has actively chased brands and companies to widen its global presence, with a dozen acquisitions since 2006.

"We look for market access, distribution network, and registrations access in an acquisition," Krishnan said.

It expects to boost performance at its biggest acquisition, French agrochem firm Cerexagri, by posting operating margins at 20 percent-plus levels by April-June, from 9-10 percent now.

"The perception that the Cerexagri acquisition and its integration would stretch our bandwidth is not true," he said. "In fact, it is the opposite. The relationship with the global firms that Cerexagri's team brings is a great value-add."

However, the Cerexagri integration would hurt United's short term operating margins. For 2007/08, consolidated margins are seen falling to 19-20 percent from 25 percent last year.

Krishnan forecast revenue of $825 million (33 billion rupees) for the full year, up 35 percent from last year, as it pushes for a strong pipeline of off-patent products.

INDUSTRY ON UPCYCLE

The general boom witnessed in commodities is yet to sweep across the agri-commodities sector, Krishnan said.

"Agriculture will see interesting times ahead and usage of crop protection products will be higher." Growing food demand, changing consumption pattern in major continents and rising interest in bio-fuels would drive growth in agriculture, he said.

"We have one of the more balanced product portfolios in the industry," Krishnan said. "We believe we haven't yet reached a mature level in any of our markets."

http://www.uplonline.com/

T

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