UPL's revenue fell 17% in the first quarter of fiscal 2024

UPL recently announced its financial results for the first quarter of fiscal year 2024 (April-June 2023).

In the first quarter of FY2024, UPL achieved revenue of Rs 8,963 crore and EBITDA of Rs 15,93 crore, down 17% and 32% respectively from the previous year. As of June 2023, the company's net debt was $3.19 billion, down $160 million from the same period last year.

Revenue and earnings before interest, tax, depreciation and amortization (EBITDA) in the first quarter were impacted by an industry-wide slowdown. 

The differentiated and sustainable product portfolio was resilient, growing 7% year-over-year and providing strong support from a significant increase in revenue to 37% from 27% in the first quarter of fiscal 2023. 

The seed business performed strongly, with revenue up 26 percent and EBITDA up 54 percent year over year. 

Despite lower factoring volumes ($890 million as at 30 June 2023 and $1.14 billion as at 30 June 2022), net debt as at 30 June 2023 was $3.193 billion, still $160 million lower than the same period last year. Adjusted for lower factoring volumes, net debt would have been $2,943 million (down $410 million year over year).

Mr. Mike Frank, CEO of UPL, commented on the company's performance. He noted that the past two quarters have been challenging for the global agrochemical industry due to distributors prioritizing destocking and focusing on tactical purchasing amid high channel inventories. In addition, the market is under pricing pressure due to a high base last year and intense price competition from Chinese exporters of generic products

In this context, UPL's revenue and profitability have also been affected along with other companies in the industry. Nevertheless, the company's differentiated and sustainable portfolio continued to show resilience (up 7% year over year), with its revenue share rising to 37% from 27% last year. The excellent product mix and regional mix, combined with higher margins provided by Advanta, the seed company, improved profit margins by approximately 198 basis points in the first quarter.

Mike Frank said that one of UPL's priorities is to improve cash flow and optimize the balance sheet. As a result, despite a significant reduction in factoring (down approximately $250 million year-over-year), the company's net debt decreased by nearly $160 million compared to June 2022. The company will also implement a $100 million cost reduction program over the next 24 months, of which 50% is expected to be completed by fiscal 2024.

During the quarter, UPL's specialty Chemicals business, including active ingredient production, was proposed to be transferred to a wholly-owned subsidiary, UPL Speciality Chemicals Ltd. (USCL), for a transfer consideration of Rs 3,572 crore. The transfer has been approved at the shareholders' meeting on July 20, 2023, and the transaction is expected to close in the coming months