First Cut | UPL Q3FY19 review: Healthy performance but one-off affects net margins

Ruchi AgrawalMoneycontrol Research

 UPL Ltd reported a healthy Q3FY19 with an improved performance both on a year-on-year (yoy) basis and sequentially. Though the net margins were impacted due to one-off exceptional expenses, the operating and gross margins reported a decent uptick.

-Revenue saw a healthy 17.3 percent YOY uptick with EBITDA up 31 percent YOY and EBITDA margins inching around 199 basis points upwards.

-There was a healthy gain in revenues in both agri business and non-agri business. However, while the non-agri business saw strong margin growth, there was a slight blip of 143 basis points in the margins of agri business.

-The company incurred gains to the tune of Rs 21 crore on account of mark to market difference on forex contracts related to borrowings and loans and advances.

-Exceptional expense of Rs 91 crore ate away the portion of the net profit of the company (-19 percent YOY) and led to a 100 basis point contraction in net margins. This expense is related to the acquisition of Arysta Lifesciences along with some litigation expenses in US and restructuring costs in LatAm.

-The company highlighted that all approvals related to the acquisition of Arysta Lifesciences have now been received and the deal is expected to be closed by 1February 2019.

-The performance during the quarter appears healthy and one off costs have impacted net profits. We expect the performance to improve further owing to attractive line up of product portfolio. However, the company has substantial exposure in various geographies and anomalies related to weather conditions and exchange rates brings uncertainty in the company’s performance.

Follow @Ruchiagrawal

For more research articles, visit our Moneycontrol Research Page.