UPL plunges 5% after slashing revenue, EBITDA growth in FY24

The shares of chemical manufacturer UPL Limited have sunk 4.77 per cent after the company posted 19 per cent fall in its Q2 FY24 revenue at Rs 10,170 crore amid global channel destocking and elevated pricing pressure.

UPL Limited shares closed 4.59 per cent lower at Rs 533 apiece on the NSE on Monday, October 30.

The earnings before interest tax depreciation and amortisation (EBITDA) of UPL Limited dipped 43 per cent to Rs 1,573 crore in Q2 FY24 as against Rs 2,768 crore in Q2 FY23. The company has incurred a loss of Rs 189 crore in the said quarter as against profit of Rs 813 crore in the year-ago period.

In its revised guidance for FY24, UPL Limited has revised revenue growth to "Flat" from +1 per cent to +5 per cent, and EBITDA growth to 0 per cent to -5 per cent from +3 per cent to +7 per cent.

Commenting on the performance, Mike Frank, CEO – UPL Corporation Ltd, said “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. 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. However, contribution margins improved by ~300 bps YoY in H1 FY24 adjusted for the short-term impact of high-cost inventory liquidation, higher than usual salesreturns, and rebatesto channel partners.

We also saw a pick-up in volumes (+1 per cent 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 per cent of crop protection revenue versus 30 per cent 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 realised in H2 FY24."