Agrochemical company UPL Ltd posted a net profit of Rs 166 crore for the April-June quarter, sharply down 81.1 percent from Rs 877 crore at the same period in the previous fiscal. The net profit also lagged the Street's expectation of Rs 262 crore.
Revenue also recorded a 17.2 percent year-on-year decline to Rs 8,963 crore as against Rs 10,821 crore clocked in the base quarter. A poll of brokerages has estimated revenue for UPL at Rs 9,790 crore.
The company attributed an industry-wide slow down as the reason behind the weak quarterly earnings.
“The global agrochemical industry has been going through a challenging phase over the last two quarters as distributors prioritized destocking and focused on tactical purchases amid high channel inventories," Mike Frank, CEO, UPL Corporation Ltd said in an exchange filing. "Additionally, the market is witnessing pricing pressure given the high base of previous year and aggressive price competition we have seen from the Chinese post patent exporters," Frank added.
Taking a weak demand environment into account, UPL also cut its revenue growth guidance for the current fiscal to 1-5 percent from the 4-8 percent, hinting towards a prolonged pressure on its topline. Along with that, the company also lowered its FY24 margin growth guidance to 3-7 percent, down from the earlier 6-10 percent.
The agrochemicals company's operating profit margin also remained under pressure and contracted to 17.8 percent in April-June from 21.6 percent seen in the year ago period. EBITDA also slumped to Rs 1,952 crore, as against Rs 2,343 crore recorded in the base quarter.
Further, given the subdued outlook for the upcoming quarters, the company will also be undertaking a cost reduction initiative of $100 million over the period of next 24 months, half of which will be realized in FY24.
Nonetheless, Frank remains optimistic to witness a demand recovery from the second half of the current fiscal as the channel inventory approaches a new normalized level.
Meanwhile, the company also reduced its net debt by around $160 million to $3,193 million as of 30 June 2023, aligned with its focus on improving cash flows and strengthening its balance sheet.
Shares of the company also reacted negatively to its Q1 earnings as they erased early gains and slipped into losses. Following the earnings announcement, shares of UPL settled 0.1 percent lower on July 31 at Rs 624.70 on the NSE.
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