UPL Q1 FY22 Conference Call Highlights

Financial Highlights

Standalone Business

• Revenue of UPL stock analysis from operations stood at 3960 crores rising 49% YOY & 51% QOQ as of UPL analyst report.

• Operating Expenses of UPL share price also rose to 3290 crores rising 56% YOY & 33% QOQ according to the UPL financial analysis.

• The EBITDA of UPL research report stood at 682 crores rising 16% YOY & 313% QOQ which is known by UPL quarterly result.

• The EBITDA Margin of UPL trend analysis stood at 17% declining 5% YOY as of UPL technical analysis but rising 11%QOQ.

• PAT of UPL results stood at 270 crores rising 81% YOY & 132% QOQ.

• PAT margin of UPL chart analysis stood at 7% rising 1% YOY 12% QOQ as of UPL fundamental analysis.

• Agro Business of UPL swot analysis contributed 3678 crores to revenue rising 47% YOY & 59% QOQ according to UPL annual report.

• Non Agro Business of UPL analysis stood at 368 crores rising 73%YOY by UPL chart & 4% QOQ.

Consolidated Business

• Revenue from operations as of UPL share price history, stood at 8515 crores rising 8% YOY but declining 33% QOQ

• Operating Expenses also stood at 6741 crores rising 12% YOY but declining 33% QOQ

• EBITDA stood at 1822 crores declining 4% YOY & 32% QOQ

• EBITDA Margin stood at 21% declining 3% YOY but standing flat QOQ

• PAT stood at 677 crores rising 23% YOY but declining 36% QOQ

• PAT margin stood at 8% rising 1% YOY but standing flat QOQ

• Agro Business contributed 8100 crores to revenue rising 8% YOY but declining 33% QOQ

• Non Agro Business stood at 501 crores rising 22%YOY but declining 2.5% QOQ

Business Highlights

• Q1 FY 2022Revenue growth split: Volume - 6%, price - 2% and Fx - 1%.

• Challenging business conditions and impact of adverse weather hit growth in Europe, China and Latin America.

• Adverse impact of increase in freight and input costs could not be entirely passed on to customers as price increases on products have lagged in terms of timing. An unfavorable product mix on pre-booked sales also hurt margins.

• Increase in allocation of resources for the new NPP platform for sustainable solutions, especially in the EU and Covid restrictions resulted in higher operating costs.

• Net W/C went up from 84 days to 91 days YoY due to increase in inventory by 12 days (to build stock for higher growth seen in 1QFY22 and expected growth in 2QFY22).

• Growth guidance for FY22 maintained at 7-10% for top-line and 10-15% for EBITDA, implying that EBITDA margin will edge up by ~100bps at the top end as per the management

• The management sees Bio Solutions growth faster than CPC, which will support growth at the higher end based on the new NPP business unit.

• UPL’s reported growth of 6% YoY in volume and 2% YoY in price was driven by growth in North America, Latin America and India.

• Decline in Europe was attributed to drought in Southern EU and generic competition - especially in Clethodim- US$9m hit YoY (Rs675mn)

• The roW also saw a 14.4% decline driven by Frost and supply constraints, especially in Glufosinate in China. Japan sales down 30% YoY due to local currency depreciation. Vietnam suffered lower sales in Glufosinate

• Europe revenue was down 11% YoY In the EU, the company is pushing its sustainable solutions business more than in other markets due to the increasing regulatory scrutiny of chemical-based pesticides. UPL’s EU sales were also affected by the EU’s decision not to renew registration for the use of potato sprout inhibitor Chlorpropham CIPC in CY20 (with different cut-off dates across the continent).

• The company saw a decline in chemical sales while sustainable solutions saw growth through BioSolutions. This still was not enough to arrest the decline in YoY revenue in UPL’s EU business.

• North America revenue was up 19% YoY, driven by high volume growth and an increase in prices. The increase in planted acreage in row crops, higher crop prices, and ability to raise CPC prices supported UPL’s growth in Non-Agro

• India's revenue growth stood at 27% YoY, aided by 7% YoY volume growth and a 14% YoY price increase in its key product - Glufosinate brands (Ferio and Sweep Power).

• Latin America's growth stood at 24% YoY despite the adverse impact from the drought in Mexico, aided by volume growth in Brazil. This was tempered by a delay in price increase and unfavorable weather.

• India witnessed strong performance with revenue growth of 27% YoY. Despite a delayed monsoon in parts of the country, second covid wave and delayed upward price revision, the market grew by 6-7% in1QFY22. Favorable commodity prices (~14%+ for food grains, ~36-48% for cash crops, pulses, etc.). UPL reported strong volume growth (~14% YoY) in Glufosinate (Ferio and Sweep Power), coupled with better price realization (up by ~7%).

• Latin America: Revenue growth in Brazil was 40% YoY while other countries reported nearly flat revenue versus 1QFY21. In Brazil, strong volume growth in Perito (by ~2x) and Sperto (by ~1.8x), coupled with better price realization for Perito, led to overall growth in the region. Mexico was affected due to a severe drought, but it is expected to catch up during the remainder of FY22. Delayed price realization was due to pre-booked orders.

• North America: Overall strong price realization adequately compensated for a marginal increase in costs. This was driven by higher commodity prices, a strong seasonal outlook, and an increase (~1-5%) in acreages of most major row crops. There was strong growth in post-patent products, along with an increase in other segments. The US administration decided to maintain a tariff structure for Chinese imports.

• Europe: Unfavorable weather conditions shrunk the market in key areas. Most of the decline was witnessed in South European countries: Propanil non derogation in Iberia, which affected sales vs 1QFY21.

• Entry of Clethodim generics in France affected sales vs1QFY21.

• UK Mancozeb-based formulations (Manzate and Nautile) phased out to 2QFY22.

• Rest of the World: There was growth in South-East Asia& AME regions despite COVID-related challenges; the upside was due to favorable commodity prices. Vietnam’s Glufosinate supply constraint was offset by increased sales in Thailand. China was affected by Glufosinate supply constraints and unfavorable weather, which affected citrus sales. Japan sales were down by ~30% YoY vs 1QFY21 due to lower H&NS, along with JPY depreciation.

• F/x loss of Rs200 crores included finance cost due to the impact of MTM loss on currency hedges on advance orders of US$500mn in Brazilian Real (over January to May’21/June’ 21). BRL appreciated by 12% in 1QFY22 -from 5.6 to 5 per USD. This will be reversed when these orders are executed.

• There was tax credit due to deferred tax assets in Brazil and the EU. The tax rate for FY22 remains at the lower end of 18% as these 1QFY22 deferred tax assets will get reversed, with Brazil advance orders getting converted into revenue and revival in EU revenue growth expected in 2HFY22.

• Net W/C to settle at 80-90 days in FY22

• The company raised another US$250mn in sustainable loan, increasing this to US$750mn (5-year bullet at LIBOR plus 130bps) - 30bps less than normal debt and another 5bps reduction possible on achieving sustainable goals.

• The new sustainable loan was used to repay part of the debt used to buy Arysta. This acquisition loan has now been reduced to US$1.55bn (Rs11625 crores).

• Gross debt stood at Rs25099 crore, net debt at Rs21467 crore, and cash at Rs3632 crores.

• The company aims to reduce Net Debt/EBITDA to under 2x by the end of FY22.

• Capex: UPL reportedFY21 Capex at ~US$287mn, including intangibles and acquisitions. FY22 Capex budget is set at US$300-320 million.

Other Developments

• UPL announced the launch of ‘nurture. farm’ - a digital platform that fosters resilient farmers, making agriculture simple, profitable, and sustainable for generations to come through technology-led solutions

• UPL announced the launch of ‘NPP’ – Natural Plant Protection – a new global business unit housing UPL’s comprehensive portfolio of natural and biologically derived agricultural inputs and technologies. NPP will act as a stand-alone brand, consolidating UPL’s existing BioSolutions portfolio, network of R&D laboratories, and facilities worldwide, which currently accounts for 7% of UPL’s total revenues. NPP’s global offering will continue to benefit from UPL’s extensive global distribution footprint, drawing on innovation, research, and development capabilities, and will be supported by UPL’s proven ability to bring products to market on a global scale

• Fitch Ratings and S&P Global Ratings retained the Investment Grade credit rating for UPL; Fitch upgraded its Credit outlook to “Stable”

• The company received the prestigious Asian Sustainability Leadership Award for Excellence in Sustainability Performance Management for displaying commendable commitment to sustainability.

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