UPL announces financial result; Q2 FY24 Revenue at ₹ 10,170 crore

October 30, 2023October 30, 2023 4 min read UPL Ltd.

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30 October 2023, Mumbai: UPL Ltd. reported financial results for the second quarter ended FY24 (July-Sep 2023)

Financial Performance Update

In ₹ crore(Unless otherwise stated)	Q2 FY24	Q2 FY23	*YoY*	H1 FY24	H1 FY23	*YoY*
Revenue	10,170	12,506	(19%)	19,133	23,328	(18%)
Contribution Profit	4,060	5,324	(24%)	8,158	10,058	(19%)
*Contribution Margin (%)*	39.9%	42.6%	(265 bps)	42.6%	43.1%	(48 bps)
EBITDA	1,573	2,768	(43%)	3,167	5,110	(38%)
*EBITDA Margin (%)*	15.5%	22.1%	(666 bps)	16.6%	21.9%	(535 bps)
Net Profit *	-189	813	–	-23	1,690	–

Note: *Net Profit attributable to equity shareholders of the company

Revenue and EBITDA for Q2 impacted by the global channel destocking and elevated pricing pressure.
Liquidation of high-cost inventory, higher-than-usual sales returns and rebates to support channel partners impacted contribution margin. Adjusting for this temporary impact, the H1FY24 contribution margins would be higher by ~300 bps vs LY (instead of reported 48 bps YoY drop)
Differentiated and Sustainable portfolio continued to perform resiliently with higher volumes (+11% YoY). Revenue share of this portfolio rose significantly to 38% of Crop Protection revenue (from 30% in Q2FY23)
Reduced SG&A expenses by 3% YoY to INR 2,486 crore.
Seeds business continued its growth momentum as revenue grew by 10% YoY in Q2 to INR 1,070 crore while EBITDA is marginally down. For H1FY24, revenue stood at INR 2,131 crore (+17% YoY).

Commenting on the performance, Mr. Mike Frank, CEO – UPL Corporation Ltd., said “The global agrochemical industry continues to go through a difficult phase with prices coming off significantly vis-à-vis the high base of the previous year amid the elevated channel inventory levels and intense price competition. Given this backdrop, the distributors prioritized destocking, and focused on purchases at lower prices to bring down their average inventory cost. In particular, destocking had a significant impact in the US and Brazil during the first half.

Our revenue and profitability for Q2 were significantly impacted by these factors in line with rest of the industry. However, contribution margins improved by ~300 bps YoY in H1FY24 adjusted for the short-term impact of high-cost inventory liquidation, higher than usual sales returns, and rebates to channel partners. We also saw a pick-up in volumes (+1% YoY) in the crop protection business (ex-India) led by the resilient performance of our differentiated and sustainable portfolio; revenue share of this portfolio increased to 38% of crop protection revenue vs 30% last year. Our cost reduction drive of $100 million over next two years is under implementation and we are on track to realize benefit of $50 million in FY24, bulk of which will be realized in H2FY24.

Going forward, we are optimistic of progressively improved performance in H2FY24 as key geographies of North America, LATAM and Europe enter major cropping season. The elevated inventory levels are expected to gradually subside with the farmgate demand continuing to be robust. In Europe, Asia, and LATAM (ex-Brazil), channel inventory levels have largely normalized; while in North America and Brazil, the scenario continues to gradually improve.

On the pricing front, most post patent molecule prices seem to have bottomed in Q2 and are now stabilizing. Overall, we are executing well in this challenging market and making changes to our operating model that will further improve our business as the cycle normalizes.”

Regional Performance Update

Region (INR crore)	Q2 FY24	Q2 FY23	*YoY % Chg.*	H1 FY24	H1 FY23	*YoY % Chg.*
Latin America	5,033	6,092	(17%)	7,997	9,557	(16%)
Europe	1,263	1,353	(7%)	2,522	3,081	(18%)
North America	507	1,185	(57%)	1,378	2,981	(54%)
India	1,387	1,809	(23%)	3,441	3,876	(11%)
Rest of the World	1,980	2,067	(4%)	3,795	3,832	(1%)
Total	10,170	12,506	*(19%)*	19,133	23,327	*(18%)*