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UNITED PHOSPHORUS
OUTPERFORMER (RS131, MCAP: RS58BN / US$1.3BN)
• UPL has maintained its revenue guidance of 5% for FY11, while providing no guidance for FY12. However, the
management indicated 18% volume growth (adjusted for adverse FX impact and pricing declines) in 9MFY11. The
company expects to maintain these growth levels.
• The company’s North America, India, Europe and RoW operations registered -3%, 20%, -25% and 14% yoy growth
and contributed 22%, 30%, 19% and 29% respectively to consolidated sales in 9MFY11.
• A sharp 25% yoy decline in the EU business was driven by a combination of price declines and volume correction.
The sales decline was a result of: 1) prolonged winters and floods in certain parts of the continent; 2) negligible pest
infections in French markets (UPL’s biggest market in the EU), which led to low offtake despite a very good harvest;
and 3) regulatory restrictions by the French government to limit creditor cycle to 45-60 days, a measure intended to
protect small domestic players.
• UPL had staffed its distributor chains in anticipation of higher sales in the US and EU, which led a yoy increase in
inventory cycle by 10 days to 109 as of December 2010. It is looking to lower this to 90 in the next few quarters.
• The management said that widening both geographical reach and portfolio was critical in mitigating increasing
business risk from adverse climatic conditions. Importantly, it emphasized the increasing importance of the
distribution network in quickly responding to changing market conditions. UPL said its ability to adapt was far
superior in India, LatAm and EU, where it has its own manufacturing facilities.
• UPL recently launched its second patented product for wheat, and sees a significant opportunity there. The company
said it remains optimistic on the macro outlook, with patented products worth up to US$3bn-4bn in sales expected to
go off patent over next couple of years.
• The company’s gross debt and cash position were Rs28bn and Rs19bn respectively as of December 2010. The
management said that the primary motive of retaining significant cash on the books was to fund inorganic growth
opportunities and for repayment of debt (~Rs2bn) over the next few months.
• UPL’s average cost of debt is 6-7%.
• The company has guided for a capex of Rs2bn in FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UNITED PHOSPHORUS
OUTPERFORMER (RS131, MCAP: RS58BN / US$1.3BN)
• UPL has maintained its revenue guidance of 5% for FY11, while providing no guidance for FY12. However, the
management indicated 18% volume growth (adjusted for adverse FX impact and pricing declines) in 9MFY11. The
company expects to maintain these growth levels.
• The company’s North America, India, Europe and RoW operations registered -3%, 20%, -25% and 14% yoy growth
and contributed 22%, 30%, 19% and 29% respectively to consolidated sales in 9MFY11.
• A sharp 25% yoy decline in the EU business was driven by a combination of price declines and volume correction.
The sales decline was a result of: 1) prolonged winters and floods in certain parts of the continent; 2) negligible pest
infections in French markets (UPL’s biggest market in the EU), which led to low offtake despite a very good harvest;
and 3) regulatory restrictions by the French government to limit creditor cycle to 45-60 days, a measure intended to
protect small domestic players.
• UPL had staffed its distributor chains in anticipation of higher sales in the US and EU, which led a yoy increase in
inventory cycle by 10 days to 109 as of December 2010. It is looking to lower this to 90 in the next few quarters.
• The management said that widening both geographical reach and portfolio was critical in mitigating increasing
business risk from adverse climatic conditions. Importantly, it emphasized the increasing importance of the
distribution network in quickly responding to changing market conditions. UPL said its ability to adapt was far
superior in India, LatAm and EU, where it has its own manufacturing facilities.
• UPL recently launched its second patented product for wheat, and sees a significant opportunity there. The company
said it remains optimistic on the macro outlook, with patented products worth up to US$3bn-4bn in sales expected to
go off patent over next couple of years.
• The company’s gross debt and cash position were Rs28bn and Rs19bn respectively as of December 2010. The
management said that the primary motive of retaining significant cash on the books was to fund inorganic growth
opportunities and for repayment of debt (~Rs2bn) over the next few months.
• UPL’s average cost of debt is 6-7%.
• The company has guided for a capex of Rs2bn in FY12.
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