Agrochemical major UPL Ltd on Monday registered a consolidated net loss of Rs. 189 crore for the second quarter of 2023-24 due to ‘global channel destocking and elevated pricing pressure’. UPL had reported a net profit of Rs. 814 crore during the corresponding quarter previous fiscal.

Total income in Q2 FY 2023-24 was Rs 10,170 crore compared to Rs. 12,507 crore during the corresponding period in FY 2022-23.

Financial Performance Update 

Note: *Net Profit attributable to equity shareholders of the company

“The global agrochemical industry continues to go through a difficult phase with prices coming off significantly vis-à-vis the high base of the previous year amid the elevated channel inventory levels and intense price competition,” Mike Frank, CEO, UPL Corporation Ltd., said.

"Given this backdrop, the distributors prioritized destocking, and focused on purchases at lower prices to bring down their average inventory cost. In particular, destocking had a significant impact in the US and Brazil during the first half. Our revenue and profitability for Q2 were significantly impacted by these factors in line with rest of the industry," Frank added.

On that account, the company cut its revenue growth guidance for FY24 to flat as against the previously guided 1-5 percent.  EBITDA guidance for FY24 was also revised lower to 0 to -5 percent as against the earlier guidance of 3-7 percent.

Meanwhile, margins also remained under pressure due to adverse geographical mix and currency headwinds. As a result, EBITDA margin contracted sharply to 15.5 percent in Q2 as against 22.5 percent in the base period.

“We also saw a pick-up in volumes (+1% YoY) in the crop protection business (ex-India) led by the resilient performance of our differentiated and sustainable portfolio; revenue share of this portfolio increased to 38% of crop protection revenue vs 30% last year. Our cost reduction drive of $100 million over next two years is under implementation and we are on track to realize benefit of $50 million in FY24, bulk of which will be realized in H2FY24,” Frank said.

As of gross debt, the company aims to reduce it by $500 million by the end of the current fiscal.

"Going forward, UPL is optimistic of progressively improved performance in H2FY24 as key geographies of North America, LATAM and Europe enter major cropping season,"Frank opined.

"The elevated inventory levels are expected to gradually subside with the farmgate demand continuing to be robust. In Europe, Asia, and LATAM (ex-Brazil), channel inventory levels have largely normalized; while in North America and Brazil, the scenario continues to gradually improve," Frank added. 

On the pricing front, Frank informed that most post patent molecule prices seem to have bottomed in Q2 and are now stabilizing.

Regional Performance Update 

''Overall, we are executing well in this challenging market and making changes to our operating model that will further improve our business as the cycle normalizes,'' he added.