UPL Ltd on Monday reported a net profit of Rs. 166 crore in the quarter ended June 2023, registering a sharp fall of 81% from Rs. 877 crore in the year-ago quarter.

The company’s revenue from operations in Q1FY24 plunged 32% to Rs. 8,963 crore from Rs. 10,821 crore, YoY.

Earnings before interest, taxes, depreciation and amortization (EBITDA) during the quarter under review decreased 16.7% to Rs. 1,952 crore from Rs. 2,343 crore, while EBITDA margin contracted by 380 basis points (bps) to 17.8% from 21.6%, YoY.

The company said its revenue and EBITDA for Q1 was impacted by the industry-wide slow down.

Net Debt stood lower by $160 million vs LY at $3,193 million as of 30 June 2023 despite lower factoring ($890 million on 30 June 2023 vs 1,140 million on 30 June 2022). Adjusted for the lower factoring quantum, net debt would have stood at $2,943 million (lower by $410 million YoY)

Commenting on the performance, Mike Frank, CEO – UPL Corporation Ltd., said “The global agrochemical industry has been going through a challenging phase over the last two quarters as distributors prioritized destocking and focused on tactical purchases amid high channel inventories. Additionally, the market is witnessing pricing pressure given the high base of previous year and aggressive price competition we have seen from the Chinese post patent exporters.

"Given this backdrop, our revenue and profitability were also impacted by these headwinds in line with the rest of the industry. Having said that our differentiated and sustainable portfolio performed resiliently (+7% YoY); with revenue share increasing significantly to 37% versus 27% last year. Favorable portfolio and regional mix coupled with better margins at Advanta helped improve contribution margins by ~198 bps YoY in Q1.

"One of our key focus areas has been to improve cash flows and strengthen our balance sheet. In-line with this, we have reduced our net debt by ~$160 million versus June 2022 despite much lower factoring (down by ~$250 million YoY).

Further, we are undertaking a cost reduction initiative of $100 million over the period of next 24 months; 50% of which we expect to be realized in FY24. Going forward, while we anticipate demand to remain subdued in Q2 FY24 as well, our performance should be sequentially better.

"We are optimistic of demand recovery in H2 FY24 as the channel inventory approaches a new normalized level. Overall, led by improved demand and cost optimization efforts, we expect our Revenue and EBITDA growth to turn positive in H2 FY24, with full year Revenue growth to now be in the range of 1-5% with EBITDA growth at 3-7%.”

Other Developments for the Quarter

During the quarter, our Specialty Chemicals Business (including AI manufacturing) was proposed to be transferred to a wholly-owned subsidiary ‘UPL Speciality Chemicals Ltd.’ (USCL) for a consideration of Rs. 3,572 crore. The proposed transfer has been approved at the shareholder meeting on 20th July 2023 and the transaction is expected to be completed in the next few months.