In FY24, UPL to maximize volume coming out of plants and compete aggressively: CEO

Mike Frank, CEO, UPL Global Crop Protection, says “next year, we anticipate that the current pricing pressure that we are seeing within the post patent segment is going to persist at least for the first half of the year. That being said, we are well positioned to compete after some of the actions that we took in the fourth quarter. We really managed our working capital and our inventories and slowed production. We ended the year with the overall reduced inventory which will set us up to compete very aggressively into the next season.”


Q4 was impacted partly on account of the oversupply in certain molecules. Going forward, do you expect the pressure to continue for the next three to six months?
When you look at our overall results, we are very pleased with how we performed this year. We grew the top line 16%. EBITDA growth was 10% overall and, of course, as you said, that was impacted by the fourth quarter performance. We did see in the fourth quarter a couple of impacts. Firstly, within our post patent segment, post Covid, as China ramped up production, the prices started coming down and so that really put distribution in a wait and watch mode as they watched the prices decline. So we competed aggressively in that marketplace and I would say globally throughout the world with the exception of North America, we saw nice growth even in the fourth quarter.

In North America, partly because of the post patent situation and also due to delayed spring, there was a very little product that moved on the ground and that did impact the timing of our sales. Next year, we anticipate that the current pricing pressure that we are seeing within the post patent segment is going to persist at least for the first half of the year. That being said, we are well positioned to compete after some of the actions that we took in the fourth quarter. We really managed our working capital and our inventories and slowed production. We ended the year with the overall reduced inventory which will set us up to compete very aggressively into the next season.

What about your FY24 guidance? Sales 4% to 8%, EBITDA 6% to 10%, what growth triggers are you expecting in the company to achieve this?
As we look at FY24, we have guided up that at the midpoint, revenue would be up about 6% and double digits in EBITDA. Again, if we look across our portfolio, we would anticipate that the global crop protection business will continue to see some headwinds as a result in the post patent segment. But that being said, as we transition more and more of our portfolio to differentiated and sustainable products, that segment of our portfolio, which is about a third of our portfolio, will perform very well going into this next season.

Our seed business has performed well throughout last year and is set up for another good year in FY24, as is our specialty chemical business. So, overall, we expect growth in every one of our platforms and again we are really excited about some of the new products that we launched last year within our crop protection business and generated about $140 million of new product revenue in our new launches last year. Those products will continue to spool up this next year and in addition to that we have another approximately $120 million of new revenue that we would expect in FY24 coming from our new product portfolio.

You reduced the net debt by $440 million to about $2.6 billion. What would be the debt reduction strategy going forward?
One of the commitments we made this year was to reduce debt and we are very pleased we have reduced overall gross debt by over $600 million and net debt reductions of $440 million. We were able to do that really based on the strong operating profits in each one of our operating units. We would expect another good year of cash generation coming into this next season. We are not going to make commitments at this point in time in terms of further debt reduction. Obviously, we will look at all the opportunities in terms of how best to use the excess cash and throughout the year we will make decisions on whether that goes into debt reduction or other investments that we could look at throughout the year.

Also, China opening up increases the availability of generic agrochemical solutions. What synergies and revenue potential can be expected from this?
We do operate in China. We have a good business there and a lot of potential. We we are looking at opportunities to expand our product portfolio, not just post patent products but also some of our differentiated and sustainable products, also bringing them into the Chinese market. Again, from a global standpoint, our manufacturing base is primarily here in India, which gives us a great competitive advantage. Our plan in FY24 is to maximize the volume coming out of our plants, compete very aggressively in the post patent segment and that will set us up well to compete in FY24.

What kind of impact in UPL's business might there be because of El Nino?
Our business is globally very diversified. We really do business in almost every market where there is agriculture and so every year there is going to be some impact on the weather. Again, with La Nina, we would expect some wetness again in markets like here, which could have some impact. Last year, our business was impacted in Argentina because of the drought. The US and Europe also had very hot and dry conditions in some of the markets that had impacted us. So, as those markets normalise, we would expect some opportunity as we look ahead to the next year just from an overall weather perspective.