UPL Ltd shares jump 7% despite Q2 net loss; volume growth drives revenue increase

UPL Ltd gains 7% despite pricing pressures; reports Q2 revenue growth of 4% UPL Ltd saw its share price rise by over 7% in early trades on Tuesday, reaching an intraday high of Rs. 552.70, after the company released its Q2 results on Monday. Despite challenges such as price declines, UPL reported solid volume-driven growth during the quarter. The stock opened at Rs 520.05 on the BSE, slightly up from the previous day's close of Rs.515.10, before surging higher.

For Q2, UPL's revenues increased by 4 per cent year-on-year, reaching Rs. 7,676 crore. The company saw a 13 per cent rise in volumes, although this was partially offset by an 8 per cent drop in prices. The growth was largely driven by a focus on gaining market share, especially in its key markets of Brazil, Europe, and North America.

Notably, UPL's fungicide volumes, particularly mancozeb in Brazil, saw a strong performance, while herbicide volumes in Argentina and North America were impacted. Additionally, the prices of key insecticide active ingredients in Brazil faced erosion, although this was partly compensated by volume growth in North America.

Despite the positive volume growth, UPL's contribution margin contracted due to pricing pressures, primarily in Latin America (LATAM), and an unfavourable product mix in Europe. The company’s Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) for the quarter stood at Rs 745 crore, a decline of 9 per cent compared to the previous year.

A significant concern, however, was UPL's net loss of Rs 443 crore for the quarter, signalling the challenges the company faced amid pricing pressures and margin contraction.

In summary, while UPL’s volume growth in key markets and focus on market share expansion were commendable, the pressure on pricing in several regions and lower margins impacted profitability.