UPL Ltd., a leading agrochemical company, has recently reported its financial results for Q4 FY23 and the full fiscal year.
The company’s PAT (Profit After Tax) for the quarter was INR 7.92 billion, a significant decline of 43% compared to the corresponding period last year when it was INR 13.79 billion. However, the company’s revenue for the quarter grew by 4% YoY to INR 165.69 billion from INR 156.80 billion in Q4 FY22.
The company attributed the weak performance in the quarter to a rapid decline in product prices and delays in planting seasons, leading to headwinds for product placements.
Revenue Growth and EBITDA Margin
Despite the challenging quarter, UPL Ltd. recorded a 16% YoY growth in its revenue for the full fiscal year FY23 to INR 535.76 billion. The revenue growth was primarily driven by better product realizations (+10%), favorable currency impact (+5%), and flat volumes.
Furthermore, the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for FY23 grew by 10% YoY to INR 111.78 billion as against INR 101.65 billion in FY22. However, the EBITDA margin was lower mainly due to weaker-than-expected performance in Q4 impacted by headwinds in the post-patent space, which offset the healthy performance delivered during the first nine months.
Reduction in Debt
UPL Ltd. generated strong cash flows during the year, enabling it to reduce its gross debt by US$617 million and net debt by US$440 million, resulting in a net debt of US$2.06 billion as of 31st March 2023. The company attributed the deleveraging of its balance sheet to improved cash flow from operations and a leaner working capital cycle.
Leadership’s Comments
Jai Shroff, Chairman and Group CEO of UPL Ltd., expressed satisfaction with the company’s performance despite significant headwinds in the final quarter. He attributed the company’s success to the dedication, agility, and tenacity of its teams, which enabled it to deliver on most of its commitments. Additionally, he highlighted the company’s focus on creating shareholder value, which led to the creation of distinct pure-play platforms during the year to bring in enhanced focus and operational freedom to pursue independent growth strategies, thereby unleashing the growth potential of each platform.
Mike Frank, CEO of UPL Global Crop Protection, described FY23 as a tale of two distinct periods, with the first nine months delivering over 20% growth in revenue and EBITDA. He noted that the fourth quarter was unusual, with pricing pressure and delayed purchases by channel in the post-patent space due to an oversupply of certain molecules. However, he expressed confidence in the company’s ability to deal with the challenging market conditions, given its lean inventory position, and its superior manufacturing and product innovation capabilities.
Future Outlook
Looking forward to FY24, Jai Shroff expressed confidence that the company was well-positioned to deal with the market headwinds and deliver better profitability growth. In the longer term, the company remains confident of achieving its growth ambitions and transforming the food value chain with an emphasis on sustainability. Mike Frank echoed this sentiment, stating that the company was well-placed to deal with the challenging market conditions likely to persist for the first half of FY24, but also to benefit once the market begins to normalize thereafter. The company remains confident of growing significantly faster than the market in FY24 and beyond.