UPL Q2 Results: Management expects no revenue growth in FY24, operating profit may fall 5%

However, the company is optimistic that the second half of the year will be better than the first half. "We are optimistic of progressively improved performance as key geographies of North America, LATAM and Europe enter major cropping season," the company statement said.

For the September quarter, UPL reported a net loss of ₹189 crore, while a CNBC-TV18 poll expected the company to report a net profit of ₹324 crore. During the same quarter last year, the company had reported a net profit of ₹814 crore.

Revenue for the quarter stood at ₹10,170 crore, which was also lower than the estimates of ₹10,811 crore. Operating profit at ₹1,575 crore also missed expectations of ₹2,059 crore. EBITDA margin for the quarter narrowed by 700 basis points from last year to 15.5% from 22.5%. The CNBC-TV18 poll had pegged that figure at 19%.

UPL mentioned that revenue and profitability during the quarter was significantly impacted as distributors prioritised destocking, and focused on purchases at lower prices to bring down their average inventory cost. Destocking had a significant impact on US and Brazil, both of which are key geographies for UPL.

"The global agrochemical industry continues to go through a difficult phase with prices coming off significantly from the high base of the previous year amid the elevated channel inventory levels and intense price competition," Mike Frank, UPL Corp's CEO said.

UPL's contribution margin also known as gross margin fell by 265 basis points year-on-year to 39.9% during the quarter. Gross margin is the money left over from sales after paying all variable expenses associated with producing a product.

Liquidation of high-cost inventory, higher than usual sales returns and rebates to support channel partners impacted the company's gross margin. "Adjusting for this temporary impact, the contribution margin for the first half of financial year 2024 would have been higher by nearly 300 basis points," the company said.

UPL's reported net debt in US Dollar terms stood at $3.7 billion as of September 2023. The debt increased by $111 million from last year due to lower procurement amid reduced manufacturing activity in the first half of the year. The company has a target to bring down gross debt by $500 million by March 2024.

Shares of UPL ended 4.6% lower at Rs 533 post the earnings announcement. The stock closed at a 52-week low and is down 27% so far in 2023.