UPL Ltd, an agro-chemical firm, disclosed a consolidated net loss of Rs 189 crore for the second quarter of 2023-24 due to global ‘channel destocking,’ resulting in a decline in revenue. This contrasts with a net profit of Rs 814 crore in the corresponding quarter of the previous fiscal year, as per a regulatory filing.
Financial Overview
The total income for the quarter stood at Rs 10,170 crore, down from Rs 12,507 crore in the same period a year ago.
From its India operations, the company recorded revenue of Rs 1,387 crore during the quarter, compared to Rs 1,809 crore in the previous year.
Industry Challenges and Impact
UPL Corporation Ltd CEO Mike Frank noted the challenges in the global agrochemical industry, citing significant price reductions compared to the previous year’s high base. He mentioned elevated channel inventory levels and fierce price competition as contributing factors.
During the first half of the year, distributors focused on destocking, prioritizing purchases at lower prices to reduce their average inventory cost. This destocking notably affected regions like the US and Brazil.
Outlook and Future Prospects
Looking ahead, UPL is optimistic about improved performance in the second half of the fiscal year as key geographies such as North America, Latin America, and Europe enter the major cropping season.
The company expects elevated inventory levels to gradually decrease, supported by robust farm gate demand. Inventory levels have normalized in Europe, Asia, and Latin America (excluding Brazil), with gradual improvements observed in North America and Brazil.
Frank mentioned that most post-patent molecule prices appear to have stabilized after reaching a bottom in Q2.
Adaptation to Market Challenges
Despite the challenging market conditions, UPL is focusing on executing well and making operational changes to enhance its business as the cycle normalizes.
The company’s shares settled at Rs 538.40 apiece, experiencing a 3.64% decline on BSE.