UPL FY2024 challenged by 20% Revenue decline, but Q4 shows margin recovery

UPL Ltd. (NSE: UPL & BSE: 512070, LSE: UPLL), reported financial results for the fourth quarter that ended March 31, 2024.

Financial Performance Update

• Reported margin recovery in Q4FY24 compared to Q3FY24.

• Q4FY24 Revenue declined by 15% primarily due to lower prices in the post-patent market (prices came off against last year’s [LY] higher base). Volumes were largely in line with LY.

• Contribution margins are primarily impacted by the liquidation of high-cost inventory and higher rebates to support the channel.

• Adjusted for this transitory impact, Q4FY24 contribution margins would be higher vs. LY, and full-year FY24 contribution margin would be on par with LY.

• Differentiated and Sustainable portfolio continued to outperform. Share of this portfolio as % of CP revenue rose ~700 bps YoY to 35% for full-year FY24.

• Reduced SG&A expenses by 17% YoY to INR 2,209 crore in Q4

Commenting on the Q4FY24 performance, Mike Frank, CEO, UPL Corporation Ltd., said: ″We delivered significantly improved financial results in Q4 versus the two preceding quarters, inspite of the prevailing volatile and challenging market conditions.

As compared to Q3, volumes recovered well and were in-line with LY, largely led by the strong performance of our high-margin differentiated and sustainable portfolio, which contributed 36% of crop protection revenue vs 29% LY. Our recent launches of Evolution, Feroce and Shenzi did exceedingly well, growing volumes by >50%.

In addition, Europe and Rest of the World regions, had a strong performance posting double-digit growth.

Contribution margins were in-line with last year, adjusted for the transitory impact of high-cost inventory liquidation and higher rebates to support channel partners. Our cost optimization efforts paid off as we reduced Q4 SG&A expenses by 17% YoY.

Furthermore, Advanta, our global seeds platform continued to see robust traction delivering revenue growth of 34% and 38% respectively for the quarter.

As we look ahead to FY25, we expect a return to growth and normalization in margins driven by the agchem market returning to normality. Further, our foremost priority remains to deleverage our balance sheet which we plan to achieve through operational cash flows, completion of rights issue, and pursuing capital raise opportunities within our platforms.″

Regional Performance Update

Debt Update

During the quarter,Net Debt increased by $602 Mn vs LY to $2.66 Bn at the end of FY24 due to reduced factoring, and cash flow impact of decline in profitability. Adjusted for reduced factoring (down ~ $400 Mn YoY): net debt reduced significantly by $1.1 Bn from $3.8 Bn at the end of Dec’23 to $2.66 Bn at the end of FY24 through better working capital management. On a YoY basis, net debt increased by $200 Mn adjusted for reduced factoring (down $400 Mn YoY).