UPL returns to profitability in Q2FY25 with robust revenue growth; PAT at Rs 43 crore despite forex losses

UPL, the global agrochemical giant, reported a sharp turnaround in its financial performance for the second quarter of FY25, posting a net profit of Rs 43 crore compared to a net loss of Rs 189 crore in the same period last year. The improved profitability was achieved despite significant forex and exceptional losses.

Revenue and EBITDA witness moderate growth

The company’s consolidated revenue grew by 4.2 per cent year-on-year to Rs 10,600 crore, up from Rs 10,170 crore in Q2FY24. The rise in revenue was driven by strong volume growth, offsetting challenges such as destocking in China and global market uncertainties. Adjusted EBITDA increased by 2.5 per cent to Rs 1,615 crore from Rs 1,575 crore, reflecting steady operational performance despite a forex loss of Rs 250 crore factored into the EBITDA.

 Margins contract slightly due to external pressures

UPL’s adjusted EBITDA margin came in at 15.2 percent, marginally lower than 15.5 percent in the previous year. The contraction in margins was attributed to increased dumping and prolonged destocking from Chinese markets, which impacted pricing power and pressured profit margins. The company also reported an exceptional loss of Rs 87 crore, which was not adjusted in the EBITDA, highlighting ongoing challenges.

 Return to profitability driven by tax rate reduction

A significant factor in UPL’s return to profit was the reduction in the effective tax rate, which provided a cushion against rising finance costs linked to the company's increasing debt levels. Despite the headwinds, the shift from a loss to a profit is a positive sign of the company’s efforts to manage costs and optimize its financial structure.

 Market reaction and outlook

UPL’s shares were trading at .04 per cent at Rs 535.10 on Monday at 9:40 AM, reflecting investor concerns over the company's shrinking margins and higher debt burden. Analysts noted that while the recovery in profits is encouraging, persistent issues like pricing pressures from Chinese dumping and the rising cost of debt remain key challenges going forward. 

With volume growth expected to continue supporting income, UPL aims to navigate through global headwinds and stabilize its profit margins. However, close monitoring of external factors like market conditions in China and debt levels will be crucial in determining future profitability.