Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth for the first quarter was flat at 1%, driven by a 16% increase in volumes.
- Global Crop Protection business grew by 5%, showcasing strong performance in key regions.
- Net working capital decreased by 1 day as of June 30, 2025, indicating improved efficiency.
- Net finance costs remained largely flat despite a significant rise in benchmark rates.
- UPL Ltd maintains its guidance for EBITDA growth of greater than 50% over FY24 and cash flow from operations of INR300 million to INR400 million.
Negative Points
- Contribution margins were lower by 620 basis points year-on-year, primarily due to price decline and increased trade expenses.
- EBITDA dropped by 28% year-on-year, reflecting ongoing financial challenges.
- Advanta, the seeds platform, faced headwinds due to weather challenges, impacting production and leading to a 7% decline in sales and a 13% drop in EBITDA.
- Net debt increased by INR639 million in June 2024, indicating higher financial leverage.
- The company reported a net loss of INR384 crores for the quarter, driven by the significant drop in EBITDA.
Q & A Highlights
Q: Can you give more details on what led to such strong sudden volume growth in the North American market in the first quarter? Is it a temporary one-off restocking event, or will it sustain for the rest of the year?
A: In North America, the channel went into the season with less inventory than normal due to destocking last year. This led to opportunities in herbicides to complete in-season application business. We expect this trend to continue with the channel maintaining a just-in-time inventory position. The destocking is largely complete, and while price increases are not expected, margins will improve as the year progresses. (Mike Frank, CEO)
Q: Regarding the India business, has the introduction of minimum import prices on glufosinate benefited UPL in the first quarter?
A: We have a strong brand position in the market, which benefits us despite the overall cost coming down. The antidumping duties are more for regulators to decide, but we are confident in growing this product in India due to its market potential. (Anand Vora, CFO)
Q: Based on the guidance of 4% to 8% revenue growth and 50% EBITDA growth for FY25, what are the triggers that will make this achievable given the Q1 results?
A: Contribution margins have normalized, and we expect good volume growth across various regions. The larger market seasons in Latin America, Europe, and the U.S. will begin in Q3 and Q4, giving us confidence in meeting our targets. (Anand Vora, CFO; Mike Frank, CEO)
Q: What is the current mix of differentiated and sustainable products in your sales, and what is the target for the year?
A: For Q1, the mix was about one-third differentiated and sustainable products. We aim for a 60-40 mix by the end of the year, driven by new product launches. (Mike Frank, CEO)
Q: Can you explain the reason for the PAT loss this quarter and when you expect it to become positive?
A: We expect to return to positive PAT in H2, driven by price stabilization, benefits of low-cost inventory, and volume growth. (Anand Vora, CFO)
Q: What is the outlook for the India business, UPL SAS, given the transition to tighter credit and inventory norms?
A: The phasing of sales might shift, but we expect growth to return to normal with the Indian monsoon outlook improving. New product introductions will also help. (Ashish Dobhal, CEO India Crop Protection Platform)
Q: How do you see the competition from China impacting the North American market for the rest of the year?
A: UPL's supply chain capability allows us to compete effectively. We expect prices to remain stable and do not foresee significant price increases or decreases. (Mike Frank, CEO)
Q: What are the plans regarding the U.S. dollar perpetuals callable next year in February?
A: We have not decided yet. Perpetuals are currently one of the cheaper debts on our books. We will use free cash flow and rights issue proceeds to reduce debt but haven't decided whether to buy back perpetuals or repay other debt. (Anand Vora, CFO)
Q: Can you provide more details on the $100 million cost optimization target for FY25?
A: The cost optimization includes rationalization of manpower, travel, advertising, promotion, and consultant costs. We have set up a global business service center to bring more efficiency. (Anand Vora, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
