UPL Ltd. – Q2FY25 Result Update

Latin America business:

• Flat Revenue Growth: Revenue from the region remained almost flat YoY in Q2FY25, balancing higher volumes and price erosion.
• Brazil Volume Growth: Volumes in Brazil increased by 30% YoY, primarily driven by fungicide products, despite price erosion in some products.
• Soybean Planting Demand: Management expects increased demand from Brazil as the soybean planting season advances.
• Strategic Focus: UPL plans to capitalize on growing demand in Latin America by expanding market share and driving volume growth.

North America business:

• In Q2FY25, revenue increased by 16% YoY, driven by strong demand in products like insecticides, fungicides etc. 
• The Management expects that potential changes in international trade policies, particularly higher tariffs on Chinese exports to the US would strengthen their position in North America.

Europe:

• Revenue Growth: Revenue from the region stood at ₹12.6 billion, marking an 18% YoY increase driven by fungicide sales growth.
• NPP Bio Solutions Performance: The NPP bio solutions business in Europe saw a 25% YoY revenue growth, supported by robust volume increases.
• Future Growth Outlook: Continued growth in Europe is expected due to:
  1. New product launches.
  2. Stable active ingredient pricing.
  3. Internal supply chain improvements.

Rest of the World:

• Revenue declined 2% annually due to lower sales in herbicides and insecticides, which were partially offset by growth in fungicides.

UPL Sustainable Agri Solutions (India):

• The UPL SAS revenue growth for the quarter was increased by 20% YoY to Rs. 10.1 bn in Q2FY25, backed by increased volumes, particularly in herbicides and normalized channel inventory. 
• The company’s sales related to cotton were negatively impacted due to low spraying activity in northern India. However, the company achieved growth by diversifying into other crops such as rice, maize, sugarcane etc. 
• UPL SAS continued to focus on stricter credit, inventory norms and margins to drive better cash flows (complete impact to be seen post Kharif).

Advanta Enterprises:

• The company reported a 4% YoY increase in revenue to Rs. 11.1 bn, primarily driven by higher prices. The company’s continued business momentum is expected to yield favorable results in H2FY25.

Guidance:

• UPL remains confident of delivering on previously provided revenue growth guidance of 4-8%, which will be primarily led by volumes. The company also continue to guide to EBITDA growth of 50%+ in FY2025. Capex guidance for FY2025 is Rs18 bn. 
• Volume growth for FY2026 is foreseen at around 5%. Prices are expected to remain flat versus current levels. Freight expenses that were higher in H1FY25 are expected to normalize in H2FY25. 
• On the rights issue, management said they cannot comment on timelines due to regulatory restrictions, but UPL’s Board has revised the targeted amount to US$400 mn (down from US$500 mn previously).