Analyst Concall
UPL confident of maintaining EBITDA guidance for FY25
This story was originally published at 20:39 IST on 31 January 2025
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--UPL: Confident of maintaining EBITDA, PAT guidance for FY25
--CONTEXT: UPL management's comments in post-earnings analyst concall
--UPL: Channel inventory, rebates normalised Oct-Dec in North American ops
--UPL: Saw some softness in ops in China, Australia, some African nations
--UPL: Industry to see mid to low single digit volume growth in FY26
By Akshay V. Johnson
MUMBAI – UPL Ltd. is confident of delivering on its guidance of 50% growth in earnings before interest, tax, depreciation, and amortisation in 2024-25 (Apr-Mar), the management said at a post-earnings analyst conference call on Friday. The company's EBITDA grew 36% on year to INR 48.80 billion in the first nine months of the year, driven largely by volumes and productivity enhancement schemes.
The EBITDA margins rose by 340 basis points over the previous year to 15.7%. The company is also on track to achieve its target of $300 million to $400 million of operating free cash flow by the end of this financial year. At the industry level, the management sees mid-to-low single digit volume growth in FY26.
The company made a capital expenditure of INR 12 billion in the nine months ended December, out of its total budget of INR 18 billion for FY25. The company hopes to keep the capital expenditure at INR 15 billion-INR 16 billion to protect some of the cash flow out of the budgeted capital expenditure, the management said.
The company will continue to drive new product launches in the next 12 to 24 months, which are primarily in the differentiated and sustainable segment, which will have a higher margin profile, the management said.
As of Dec. 31, the company's net debt was INR 302.44 billion, down INR 59.30 billion from a year ago. The company was able to achieve this reduction in net debt on account of improvement in working capital management, the company said.
UPL expects the global crop protection market to continue its rebound as farmer and dealer buying patterns are now reset and channel destocking is largely complete in most of the major markets. The company continues to see normalised order patterns with good farm gate demand and a healthy balance between channel stocking and farm gate usage, the management said.
The company has seen strong margin improvement in its Natural Plant Protection business, driven by a mix of improved pricing and higher volumes for bio-simulants in both Europe and Brazil. The Natural Plant Protection business saw strong growth in Europe, driven by volumes, while also delivering on margin expansion, the management said.
The company's business in Brazil saw robust volumes, which were partially offset by foreign exchange impact. The growth in Brazil's business was led by Mancozeb, supported by Acephate. Mancozeb is a fungicide used in agriculture to protect crops from fungal diseases, while Acephate is an insecticide used to control insects on crops, in golf courses and in commercial and institutional facilities. In the rest of Latin America, the volume-led growth was offset by continued pricing pressure, the management said.
The North American region registered a strong growth of 67% for the latest quarter, led by strong demand for its products and normalisation of channel inventories and rebates, the management said. The company's revenues from the rest of the world segment fell 4% on year due to pricing pressure. The company saw some softness in its operations in China, Australia, and some countries in Africa, the management said.
The company posted a consolidated net profit of INR 8.28 billion during the December quarter compared with a net loss of INR 12.17 billion during the same quarter last year. The company's consolidated revenue rose 10.3% on year to INR 109.07 billion in Oct-Dec. On Friday, the shares of the company closed at INR 603.75 billion, up 6.5% from Thursday. End
US$1 = INR 86.60
Edited by Saji George Titus
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