India's UPL posts wider-than-expected Q1 loss on lower product prices

UPL Ltd. (NSE: UPL & BSE: 512070, LSE: UPLL), reported financial results for the first quarter ended June 30, 2024.

• Revenue growth for the first quarter was flat at 1%, driven by 16% increase in volumes, 14% decline in price and a negative 1% Fx impact.

• Seeds business faced headwinds on account of weather challenges that impacted production, created inventory shortages and supply constraints, leading to a revenue drop of 7% and EBITDA drop of 30% YoY.

• Net Debt increased by $639 million in Q1FY25 vs year end March 24. The corresponding increase last year was $1,136 million.

Financial Performance

Commenting on the Q1FY25 performance, Mike Frank, CEO, UPL Corporation Ltd., said: ″We continue to see strong fundamentals in the global crop protection market, with farmgate demand for our products at or above last year levels in most regions.

Herbicides led the growth in North America, driven by glufosinate and clethodim. Our herbicide performance in Brazil also did well. Fungicides growth was led by higher volumes in Europe and North America.

Revenue growth in our Natural Plant Protection (NPP) business was impressive, up 10% versus last year, driven by a strong performance in Europe, among other regions.

Our contribution margin compressed by ~600 bps vs Q1FY24. This was primarily due to price decline, and partially offset with lower cost of goods. Increased freight costs and foreign exchange were also headwinds on margins this quarter.

From an SG&A perspective, we continue to remain disciplined, and the organization is focused on making improvements in the operating model and driving efficiency throughout the enterprise.″

Commenting on the Q1FY25 performance, Ashish Dobhal, CEO, UPL SAS, said: ″On our India Crop Protection business (UPL SAS), we continued our efforts to restructure the business through strict credit policies and tighter credit terms, which lead to a postponement of sales closer to season, and the consequent impact on Q1FY25 revenues. However our contribution margins and cash flows have improved and working capital reduced, giving us the confidence that this is the right structural move for us in India.″

Commenting on the Q1FY25 performance, Bhupen Dubey, CEO, Advanta, said: ″On our global seeds platform, Advanta, we saw some headwinds in Q1FY25 on account of weather challenges that impacted production, created inventory shortages and supply constraints, leading to the impact on sales and EBITDA margins.″

Regional Performance Update

Overall, for FY25, UPL continues to focus on margins, the benefit of which is expected to get more pronounced in the second half of the year. UPL's focus on cash generation continues, and the company is optimizing its inventories and other working capital items.