- UPL reported a surprise loss in the third quarter, with a net loss of 12.2 billion rupees compared to a profit of 10.9 billion rupees year on year.
- The revenue was 98.9 billion rupees, which is a decrease of 28% from the previous year.
- Sales in Latin America were 42.9 billion rupees, a decrease of 28% year on year.
- Sales in Europe were 10.06 billion rupees, a decrease of 30% year on year.
- Sales in North America were 9.9 billion rupees, a decrease of 64% year on year.
- Sales in India were 8.6 billion rupees, a decrease of 20% year on year.
- Sales in the rest of the world were 27.4 billion rupees, an increase of 12% year on year.
- Total costs were 116.6 billion rupees, a decrease of 5.3% year on year.
- Raw material costs were 63.2 billion rupees, a decrease of 4.5% year on year.
- Other income was 1.51 billion rupees, an increase of 31% year on year.
- Ebitda was 4.16 billion rupees, a decrease of 86% year on year.
- The Ebitda margin was 4.2%, compared to 22.2% the previous year.
- UPL is exploring capital raise opportunities in platforms.
- Advanta’s FY24 Ebitda growth is expected to be in low double-digits.
- UPL expects a normalized business performance from the second quarter of FY25.
- Third quarter revenue and Ebitda were impacted by global channel destocking and ongoing pricing pressure.
- High-cost inventory liquidation and higher rebates to support channel partners impacted the contribution margin.
- Net debt stood at $3.77 billion as of December 31, with cash and cash equivalent at $580 million.
- Destocking continued to affect the global agrochemical market according to Mike Frank, CEO of UPL Corp.
- Prices in the crop protection business remained stable quarter on quarter but decreased significantly compared to the previous year due to intense post-patent price competition.
UPL Ltd on Smartkarma
UPL Ltd, a leading agriculture solutions company, has recently been under the spotlight on Smartkarma, an independent investment research network. The company’s Q2/23-24 results, as reported by Lucror Analytics, have raised concerns among analysts, with a “bear” sentiment being expressed by Trung Nguyen. The results showed a significant decline in revenues and earnings, along with a deterioration in working capital. These numbers have only deepened the scepticism towards the company, with analysts questioning the lack of discussion on the huge debt reduction and the unusual earnings call set-up in the previous quarter.
The pressure to reduce net debt to USD 2 billion in Q4/22-23, in line with management’s aggressive guidance and rating agencies’ expectations, has also come under scrutiny. The fact that the Q4 results were released in early May 2023, almost halfway through Q1/23-24, without any indications of weak Q1 or H1 numbers, has added to the concerns. Furthermore, the revised downwards guidance by management, which implies a c. 18% y-o-y revenue growth and a c. 28-30% increase in EBITDA in H2/23-24, has also been met with scepticism. With management not expecting any y-o-y improvement in Q3, analysts believe that for UPL to meet the guidance, all the growth would have to be registered in Q4. However, there is doubt that the company will be able to meet its full-year guidance.
A look at UPL Ltd Smart Scores
| Factor | Score | Magnitude |
|---|---|---|
| Value | 4 | |
| Dividend | 5 | |
| Growth | 3 | |
| Resilience | 2 | |
| Momentum | 2 | |
| OVERALL SMART SCORE | 3.2 |
Smart Score is a compound score for the Company indicating its overall outlook. It is derived by taking an equally weighted average of underlying Factor scores computed by Smartkarma
UPL Ltd, a company that specializes in manufacturing, distributing, and exporting agrochemicals, has received an overall score of 3 out of 5 on the Smartkarma Smart Scores. This score takes into account various factors such as value, dividend, growth, resilience, and momentum. UPL Ltd has scored high in the value and dividend categories with a score of 4 and 5 respectively, indicating that it is a financially sound company with good potential for dividends. However, it has received a slightly lower score of 3 in the growth category, suggesting that it may not experience significant growth in the long term. In terms of resilience and momentum, UPL Ltd has received scores of 2, indicating that it may face some challenges in these areas in the future.
Looking at the long-term outlook for UPL Ltd, the Smartkarma Smart Scores suggest that it is a solid company with potential for dividends and a good value for investors. With a strong focus on agrochemicals, UPL Ltd has established itself as a leading manufacturer and exporter in this industry. However, the company may face some challenges in terms of growth, resilience, and momentum, which could impact its overall performance in the long run. As with any investment decision, it is important for investors to carefully consider all factors and conduct their own research before making any decisions.
Disclaimer: This article by Smartkarma is general in nature and based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Note that our articles may not factor in the latest price-sensitive company announcements or qualitative material.
While all reasonable care has been taken in the preparation, Smartkarma makes no assurance about the accuracy of any generated data or content. All content is indicative only and should be independently checked for accuracy and confirmed before use. Smartkarma accepts no responsibility for any loss or damage caused as a result of any inaccuracy or error within the Lab online tools or generated data.
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