United Phosphorous (UPL) was founded in 1969 and is a manufacturer of crop protection products, intermediates, speciality chemicals, and other industrial chemicals. UPL is India’s largest agrochemical producer. It is one of the world’s top five post-patent agrochemical firms. It has produced over 100 insecticides, fumigants, rodenticides, fungicides, PGR, and herbicides and offers a wide range of goods.
UPL is a global crop protection product company with customers in 123 countries. Argentina, Australia, Bangladesh, Brazil, China, Canada, Denmark, Indonesia, France, Hong Kong, Japan, Korea, Mauritius, Mexico, New Zealand, Russia, Spain, Taiwan, South Africa, USA, UK, Vietnam, and Zambia all have subsidiary offices.
Quarterly Result Highlights
UPL’s revenue for the quarter grew by 4.5% but it fell short of market expectations.
The quarter was challenging due to lower product prices and planting delays, affecting sales. That being said, the company achieved strong annual revenue growth in Latin America, Europe, India, and the Rest of the World, while there was a decline in revenue in North America.
Higher volumes and improved prices were seen in the company’s corn and sunflower portfolios, but lower volumes in the vegetable portfolio partially offset the gains. EBITDA decreased by 19.5% YoY with a lower EBITDA margin mainly due to weaker performance in the post-patent space.
Profit after tax decreased by 37.8% YoY and 20.6% QoQ, below market expectations.
Valuation and Outlook
Despite challenges in Q4FY23, the company achieved healthy revenue growth. The quarter faced pricing pressure and delayed purchases in the post-patent space due to oversupply.
In Q3FY23, the company focused on market share growth, inventory management, and working capital optimization. With lean inventory and readiness for FY24, the company is prepared for ongoing market challenges.
Once the market normalizes, UPL is expected to benefit. The demand for agrochemicals remains strong, and the company is well-positioned to handle market headwinds and achieve improved profitability.
Key Concall Highlights
UPL Global Crop Protection (excludes India):
Lower revenue growth in the quarter was due to delayed spring season in the USA, declining post-patent prices, and purchase delays caused by pricing volatility.
- Management expects revenue growth of 4-8% and EBITDA growth of 6-10% for FY24.
- The company aims to achieve over 50% of revenues from high-margin differentiated and sustainable solutions by FY27. They plan to accelerate growth in specific countries, crops, and segments.
- The management anticipates $120 million in revenues from new product launches in FY24.
UPL Sustainable Agri Solutions (India)
- Management expects revenue growth of 12-16% and EBITDA growth of 14-18% for FY24.
- New product launches include Sperto, Fascinate Flash, and Larviron Spruce.
- The Nurture Platform is anticipated to reduce EBITDA level loss by 50% in FY24 through value pricing of services and overhead optimization.
- The company has increased its market share in Canola in Australia and South Africa by offering a renewed portfolio with multi-herbicide-tolerant trait platforms.
- Market share growth in India and Indonesia is driving the expansion of Tropical Yellow Field Corn.
Manufacturing and Specialty Chemicals
- Management expects revenue growth of 10-14% and EBITDA growth of 12-16%.
- The company is increasing its external B2B collaborations.
- UPL is anticipated to meet the growing demand from other UPL Group companies.
UPL Growth Outlook
For FY24, management expects revenue growth of 6-10% and EBITDA growth of 8-12%.
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