Joining us today for the results for the quarter and nine months ending 31st December 2021. On this call, we will be referring to a presentation that has been shared with you and is also available on our website. We take it as having read the safe harbor statement. From the management team, we have with us today Global CEO Jai Shroff, Group CFO Rajendra Darak, Global COO Carlos Pellicer, Global CFO Anand Vora, Global Chief Supply Chain Officer Raj Tiwari, and Chief Commercial Officer Farokh Hilloo. As far as the agenda is concerned, we will start with a brief overview from Jai, followed by a business update from Carlos and a financial update from Anand.
At the end of the presentation, people who are willing to ask a question can write it in the chat box available on your webcast screen, and we will take it over from there. With that, let me now hand it over to Jai.
Thank you, Radhika, and good afternoon and a very warm welcome to everyone. Thank you for joining us today. On the onset, I hope you all and your loved ones are healthy and doing well in the unprecedented times. Before moving on to discussion on our 3/4 performance, I would like to welcome Mike Frank. He is taking over as President and Chief Operating Officer of UPL Crop Protection business from first April onwards. Mike brings a deep industry knowledge and expertise from his years at Monsanto and more recently at Nutrien. I would like to thank Carlos for his tremendous contribution over the past year as Chief Operating Officer, during which the company has delivered significant growth. Carlos assumed additional responsibility and temporarily taken up the role of Chief Operating Officer till last year and we.
Until we found a long-term replacement. With Mike now coming on board, Carlos will resume his original role at Group Strategy and continue to lead multiple projects under the OpenAg initiative, including post-harvest business, carbon and digital projects. Moving on to our financial performance now. Over the past quarter and nine months, the entire sector had to deal with multiple challenges, including higher input costs, a sharp rise in freight and intermittent logistics or supply chain issues. On the positive side, the demand has stayed strong, and we believe that these would stay strong for a while. I'm very happy to say, the perseverance and untiring effort of the entire UPL team, we once again have been able to deliver strong set of results, surpassing our guidance.
During the quarter, the revenues grew by a robust 24% and EBITDA by 21%, which demonstrates the resilience and the quality of our business model. Our diversified global presence, in-house manufacturing of AIs, effective supply chain management and strong innovation rate results in the gradual transition to a high margin differentiated and sustainable products enabling such a strong performance, even in these inflationary markets. As announced last week, one of our associate companies in Brazil, Sinagro, which is engaged in distribution of agrochemicals and inputs, has recently brought on board Bunge as a strategic partner. Bunge will acquire 33% stake in Sinagro. Bunge is one of the global leaders in sourcing and processing and supplying of oilseeds and grain and ingredients.
We will enable Sinagro to leverage the strong Bunge relationship with farmers, thereby accelerating its growth plans in Brazil. On our ongoing journey of reimagining sustainability, I'm happy to share that our efforts have once again been recognized and UPL has ranked number one agrochemical company amongst its peers on sustainability performance by Sustainalytics second time in a row in its 2021 ESG ranking. We successfully completed the first leg of crop residue program covering 420,000 acres in North India through our digital platform, Nurture. With a very strong encouraging results, this pilot prevented 1 million tons of carbon dioxide emission from being released. We intend to expand this cover significantly to higher area next year and continue to invest on our digital platform. Finally, we look ahead to the fourth quarter.
The demand for agrochemical continues to be healthy globally. We are confident of the year-end this year on strong footing and already demonstrated and more than meeting our commitments. On that positive note, I will now hand over the floor to Carlos to take us through the business update and global operations. Over to you, Carlos.
Thank you, Jai, and good evening, everyone. The last three years have been truly special for me. We have been on an amazing journey, and I have been so proud to be part of it.
Since the integration of Arysta exactly three years ago, we have transformed UPL into a purpose-led company through OpenAg and are now on the path to reimagine sustainability. In addition to deliver upon our financial commitments year after year, we have become the leader in sustainability amongst our peers with a customer-centric approach. In the last year, I assumed the responsibility of leading the global crop protection business in addition to my original role of global COO for strategy and innovation. As shared by Jai, after the end of the financial year 2022, I will refocus my full attention towards leading UPL Group's growth strategy, leading multiple strategic projects under OpenAg. This has been possible since we have been able to find an excellent candidate in Mike to lead the global crop protection market. We are truly excited to have Mike in our team.
Mike brings deep industry knowledge, a passion for environmental and economic sustainability, and extraordinary end-to-end expertise. We could not have been choosing a better person to drive our business forward in the next phase of our journey. I would like to once again extend a heartfelt welcome to Mike. I'm now pleased to share some highlights for the 3/4 FY 2022. We continue to operate in a highly volatile and uncertain world, which keeps challenging us in new ways every day. Whether these are in the form of supply chain or increasing input costs, we have been successful in providing solutions to address the pain points of farmers globally, while also delivering strong our financial commitments. We take immense pride in the agility of our team, the strong customer relationship, unique backward integration, and supply chain excellence.
As part of our commitment to reimagine sustainability, we are excited about the recent announced collaboration of Sinagro with Bunge in Brazil, as highlighted by Jai. This partnership is expected to strengthen Sinagro's grain origination strategy to leverage complementary capacity of both companies. Some examples include the ability to strengthen fertilizer offers, improve risk management tools for barter, and become a preferred partner in sustainable, traceable, and certifiable production for farmers and end users. We would like to highlight some additional exciting new relating to our open collaboration front. Firstly, through our partnership with Meiji and Mitsui, we have obtained our first registration in India of our flupyrimin-based solution to address key pain points of rice farmers. Secondly, we continue our strong collaboration with Chr. Hansen and are pleased to announce that we will start commercializing the first solution in India after next few months.
Furthermore, our registration have been applied in Brazil for a unique nematicide composed of three strains addressing significant pain points of farmers. Lastly, we have initiated the commercialization of the solution derivative from Blockbuster CTPR in multiple geographies as a result of our collaboration with FMC. Let's take a look moving now to the financial results. I am pleased to report that our revenue as well as our EBITDA for the quarter have shown very strong, robust growth. The revenue has grown by 24%, while EBITDA have increased by 21% versus Q3 financial year 2021. The growth in revenue was led by significantly improved price realizations, coupled with a healthy volume increase. We have successfully achieved 43% gross margin, enabled by 13% price realization, largely offsetting the inflationary active ingredients and increased freight cost.
We have maintained our EBITDA margin versus last year, despite lower contribution through optimization of our overheads. Our net working capital have improved to 108 days from 117 days versus last year. Additionally, our profit after tax have grown by 40% to INR 1.218 gross versus last year. Now let's look at the performance of our regions in the Q3. In LATAM, we achieved 22% growth, led by our herbicide portfolio, largely through improved price. Additionally, our insecticides and our NPP biosolutions offering have also contribute to the revenue increase in the region. Brazil and Argentina have shown strong growth, also driven by herbicides. Mexico have maintained its revenue versus previous years, despite the impact of drought followed by a hurricane causing high channel stocks. Other countries have also grown robustly over previous year.
In North America, revenue grew by 57% this quarter as a result of a higher volume as well as improved price realization, specifically due to upsides in herbicides. Further, improved commodity price, tight supply for key products, and favorable channel stocks enable a strong performance. In Europe, we grew by a robust 26% versus previous year. This strong performance have been achieved through a mix of favorable volume growth and higher price realization. Poland and DACH region have delivered strong growth, delivered by robust performance in mainly herbicide. Growth in France have been led by a herbicide in support by fungicide and NPP biosolutions. Italy grew through higher penetration of NPP biosolution versus previous year. We also like to add the significant growth in Europe have been achieved despite revenue loss due to product bans.
In India, we have been able to maintain revenue versus previous years despite several adverse weather conditions, which has resulted in high Kharif sales returns, heavy rains post-monsoon, and the quarter led to decline in key target products, crops. The rest of the world delivered a 15% growth in revenue versus last year, despite the ongoing external challenges, including supply chain constraints. Southeast Asia, Australia, and New Zealand have growth through improved pricing, higher volume, and favorable product mix. Southern Africa have delivered strong results while it's still recovering from the warehouse disruption in July last year. Growth in China have been achieved through improved sales in the fungicide and insecticide categories. Japan revenues have been impacted by 10% depreciation of the Japanese yen and lower sales in our AGNS segment. As we anticipated in Q1, Q3 has been a very successful quarter for us.
We will carry the momentum forward in Q4 and conclude our financial year with a strong performance that will outperform our guidance from a revenue and EBITDA growth perspective. Q4 performance will be supported by strong demand for our herbicide portfolio and our continued pricing actions. In addition, we expect an accelerated growth from our NPP biosolution and a continuous strong performance from our differentiated solutions. We are also confident that the success of our upcoming new product launch include Evolution in Brazil, Trishul in India, Preview in North America, and CTPR-based solution in multiple countries. Before I hand over to our global CFO, Anand, to provide more detail on our Q3 financial results, I would like to congratulate our team for their amazing resilience, dedication, and unwavering focus in delivering such a strong performance in this quarter despite challenges on several fronts.
Anand, please can you take over now?
Thanks, and good day to everybody. I'll start by providing you with the key financial highlights for the 3/4 and nine months earnings, and then take you through the financials in detail. I'm extremely pleased to say that we reported a strong all-round performance during the 3/4, achieving robust growth in both revenues as well as profitability. Such a strong performance amidst a disruptive supply chain and inflationary environment is a true testament to the company's resilient business model. The Q3 performance highlights are as follows. Talking specifically about our year-on-year performance for the key financial metrics in Q3, we ended the quarter with revenues of INR 11,297 crores, delivering a robust growth of 24%. This growth was driven by 13% increase in price realization and a healthy 11% rise in volumes.
I must say here that the price realization growth this time has exceeded the volume growth, probably a first in many quarters. It was also encouraging to see the company firing on all cylinders. The differentiated and sustainable segment continues to grow at a stronger pace than the post-patent segment, and we saw growth across most key geographies except India. Most importantly, improved realization enabled us to cover the sharp rise in input costs and keep our gross margins intact at around 43%. Notwithstanding the 120 basis point increase in freight charges, our gross margins would have been about last year.
On the operating profitability front, we delivered a robust EBITDA growth of 21% on the back of higher contribution and improved operating efficiency with our fixed overheads as a percentage of sales coming down by 100 basis points to 19% versus 20% in Q3 of last year. Our EBITDA margins for the quarter were stable vis-a-vis that of the last year at 24%. Further, we continue to make long-term investments in our digitization platform, and in Q3, the amount spent was INR 75 crores. We continue to reduce the interest costs, and Q3, the interest costs were lower by INR 61 crores.
The FX impact in the finance costs saw a decline of INR 191 crores, while there was a corresponding increase in FX loss sitting in other income, under the head of other income of profit and loss account at INR 215 crores, resulting in a net loss of INR 24 crores, which essentially is the cost of taking the hedges. Robust growth in EBITDA, combined with lower finance costs, helped to drive 41% increase in profit before tax at INR 1,385 crores. On the tax front, and that's the income tax front, effective tax rate for the quarter was marginally higher at 12% as compared to 11% last year. As we have guided earlier for the full year, we expect the tax rate to be lower and to be at the lower end of our guidance of 15%-18%.
Overall, the net profit for the quarter stood at 18% higher at INR 937 crore versus INR 793 crore in Q3 of last year. Further, Q3 had exceptional items of about INR 52 crore on account of costs associated with restructuring, litigation, and provisions for certain expenses relating to warehouse fire in South Africa. Moving on to nine months performance, financial highlights were as follows. During our performance for the first 9 months of the year, we delivered a healthy revenue growth of 17% over that of the last year, led by 6% higher price realization and 11% increase in volumes. As stated earlier, the improved margins in Q3 enabled us to catch up on the nine months margin, and we expect to end the full year with better contribution margin than that of last year.
EBITDA for the first nine months continued to be robust and grew by 15% over that of the previous year, while our EBITDA margins were flat at 22% in spite of the inflationary pressures on costs, freight that was faced since the beginning of this year. We reduced the interest costs in nine months by INR 116 crores. The FX impact in finance costs saw a decline of INR 103 crores, while there was a corresponding increase in FX costs which was sitting in other income head of the P&L of INR 405 crores, resulting in a net impact of INR 302 crores.
On the whole, during the first nine months of the year, we saw a strong year-on-year expansion of 24% in the net profits, and we ended the net profit at INR 2,247 crores for the nine months. Moving on to working capital. On working capital front, though the working capital went up in line with the sales, but we reduced our net working capital cycle by nine days to 108 days as of December 2021, reflecting the efficiencies in managing working capital cycle. Inventories were higher by three days, receivables were lower by seven days, and payables were higher by five days. We expect the net working capital days to be around 90 days by end of the financial year. On the cash flows and debt position.
On the debt side, we continue to deleverage our balance sheet in line with our commitment. Our gross debt and net debt stood lower by INR 405 crores and INR 478 crores respectively at INR 27.33 crores and INR 23.68 crores as of December 2021. We remain confident of meeting our guidance and bringing down the net debt to EBITDA to below 2x by end of Q4. In fact, I am happy to share that in January 2022, we have repaid gross debt of $125 million. That's approximately INR 940 crores. Overall, as Jai and Carlos alluded to earlier, we continue to be well-placed on the demand front and are confident to end the finan-
financial year with robust growth exceeding the earlier guidance. With this, we open the floor for questions and answers. Back to you, Radhika.
Yeah. There are questions on the chat now, and I'll sort of read out those questions, and this will be answered thereafter. The first question in the line is, can you please help us understand the debt repayment schedule and what is the quantum of the debt repayment UPL is planning to achieve during Q4?
As you are, you would have noticed, most of our debt are long-term debts and we don't have any obligation to repay debt until May 2024. We will continue to repay the debt. This year, we are targeting around INR 350 million-INR 400 million of debt repayment, of which, as I mentioned earlier, INR 125 million debt is repaid as of January 2022.
The next question is, were there disruptions in supply chain of a competitor that was the reason for market share gains of UPL in North America? How much of the supply chain disruption is still visible going into Q4? Can UPL's resilient supply chain continue to gain market share in Q4 as well?
Carlos, you want to.
Yes. Yes, yes. We are really focused in the price realization and being able to manage the volatility, because the volatility will be there. Now we know that this 2021 and the 2022, we believe that the volatility will be there. What we have done to really be able to improve price in the level that we have will be consistent there. We will be able to really manage that. In North America and South America, the price of the commodities are so strong and the farmers are really capturing value from their crops, and they will be willing to absorb this difference as we have had during the last months.
I don't know, Jai, if you want to comment on any point on that.
Yeah. I think basically UPL has a very integrated business model with a lot of the raw materials and finished product manufacturing in-house that has helped us to continue to gain market share because there is a self-reliance in that as far as supply is concerned. That has enabled us to gain market share across the board. We've had less volatility on our supply chain costs increase than maybe some of our competitors.
Yeah. Yeah.
As far as some of the challenges are concerned, we don't see any big supply chain concerns for Q4, except for the ocean freight where things are still historically high and getting. You know, the biggest challenge for the companies has been on getting spaces on the ship and the Hazchem containers. That we have been able to even in these tough situations, for the first nine months we had a fantastic growth. We have been able to garner a very large share of space on various lines.
that we are confident that even in Q4, we would be able to have that kind of growth. There are no supply chain concerns.
The demonstration of that is say we grew 11% in volume and 13% in price. Say 11% in volume demonstrating that, we are, we have been able to manage that in a very focused way.
Yeah.
The next question is, any upward revision in the revenue EBITDA forecast? How is the cost inflation expected to impact UPL? Can you also give details on your conversations with the rating agencies? What has been the reason for the QOQ increase in receivables sold?
Carlos, you want to address the first three questions.
Yes.
I will take care of the interactions with rating agency as well as the receivables sold.
Yes. Let's say we have been able to work with an amazing connection between supply and sales, and we have been able to connect very well the ability to pricing. Say we have developed a work where the team in the field are completely connect with what is happening in the market. See that connection have gave us the possibility to really arrive where we are today, that we are able to manage this volatility. The, as Jai mentioned, this backward integration that we have given us the possibility to be completely up to date what is happening in the cost base, in the cost perspective.
The agility side of UPL gives us the possibility to really connect that end to end. Say, we have been able to strengthen our relationship with our customers even more in this momentum because it's a situation that impacting everyone and we have been able to use this relationship to manage that. Anand, can you complement how we are working on that with the last question?
Sure. Thanks, Carlos. On the specific question on the engagement with the rating agencies, we continue to engage with the rating agencies. As committed to them at the time of taking the acquisition loan, on conclusion of acquisition of Arysta in 2019, we are on target to bring down our net debt to EBITDA to below two levels. We share with them on a regular basis the performance as well as the cash flows of the company. At this stage, we don't see any apprehensions from the rating agencies on our performance. In fact, we are already engaged with them on seeing if we can get a rating upgrade.
As regards the receivable factoring, we have been engaging in this program of receivable factoring on non-recourse basis for the last at least a decade. As we have shared in the past, this program is largely taken to de-risk the organization. That's the way we look at it. Of course, in the last three years, when we took on the loan for acquisition, it did help us to reduce our debt.
Largely, this program has been undertaken in order to de-risk our business, as when we sell the receivables on a non-recourse basis to the banks, the credit evaluation of our customers or our receivables is done not only by us, that's the UPL credit team, but it's also done by the banks before they take it on their balance sheet. It just gives us reassurance, and it's one of the ways of de-risking our business. We expect this year to have close to about $1.3 billion of receivable securitization being done by end of March 2022.
Is there any prepayment of sales in North America, LatAm? Or are these, say, one-off sales that have happened in North America, LatAm because of the other competitors not able to fulfill the demand due to supply chain issues?
I'd say when we see the demand for herbicide, we have many different factors. One of the factors, this impacts LatAm and North America in a big way. One of the factors is weed resistance. Such as the shift in the weeds, the change in the types of the weeds in the fields are really transforming the demand. It's transforming what the farmer needs to manage their crops. The second factor is that glyphosate prices have increased by 4.5 times. These two factors together have come in the same time.
We have been able to read ahead to understand that many years ago. Let's say when we choose the product line that we have today have been chosen 5-7 years ago, and we were already looking for what could happen. Nowadays, it's not by coincidence that we are having the results that we are having, the possibility to supply and some of our competitors are not able to do that, because we have read ahead much earlier to be able to back integrate our production, to be able to be more independent in the supply chain side. So our ability to serve the pain points of our customers coming from this ability to anticipate farmers' pain points.
Anand.
Okay. Thanks, Carlos. How much investments have you made in the digital platform so far? How much investment do we require and how do we plan to monetize that?
You want me to go, Anand?
Yeah.
Digitization of the agriculture is an ongoing process. UPL has invested, I would say, about $50 million to take on the digital platform. The interface of farmers with using digitization is the only way to go forward in the future. This also brings us really close to understand the farmers' challenges. UPL is moving away from being a product company to a solution provider.
This is a journey which will be continuously there. The business, it will generate its return. As technology develops, this will be a continuous investment. Monetization, as we all know that, you know, it's an exciting space for investment. You know, as and when there is obviously a lot of interest in investment because we believe that our platform is the world's largest platform in AgTech. We are continuously discussing and evaluating options. As and when there is a good development, we would let the investment community know.
Thanks, Jai. Given the recent induction of Mike, acquisition in Indonesia, extending partnerships like Bunge, further to Chr. Hansen in Q2, one gets the feeling that going forward, market access and distribution would garner precedence over creating manufacturing infrastructure. Is that the right inference?
Yes and no. You know, UPL has over-invested relative to all our peers in manufacturing. This gives us a very strong supply chain platform and ability to manage costs and supply chain disruptions. We believe that we will continue to invest there. We will continue to partner. We have developed a lot of indigenous suppliers in India who are large companies now and on key strategic raw materials for UPL. We will continue to invest and continue to invest both ends as far as building a strong supply chain and access to the farmers and to our distributors.
Thanks, Jai. Southern Brazil is facing a lot of weather issues leading to yield losses. Northern Brazil is also facing flooding we hear. What will be the impact on quarter four?
We are not seeing an impact in quarter four because of that. What's happening is that there is hotspot areas in Brazil, Paraguay and Argentina that is having this severe drought. But the farmers are able to harvest basically 50% of their yield at least. That level of harvest will give them a possibility to at least break even, except some very specific region. That is, it's compared to the rest of the Brazil, parts of Paraguay and parts of Argentina. See, we don't see impact in our Q4 because of that. The other parts of the region are moving in a very good way. Let's say the results in the northern part of Brazil are exceptional.
The yield is very, very high. Say, we are expecting a very strong Q4 and in other parts of the world, like North America, Europe, Asia, we are seeing a robust Q4 perspective too. We don't see an impact for Q4.
What's the update on the FMC collaboration? When do we expect the first product rollout, and when are we expected to start supplying AI to FMC?
Raj, would you like to answer that?
Yeah. No. Our plant will go into, you know, operations towards end of Q4, and therefore, Q1 we expect the supplies to start.
Maybe Carlos will give an update on, I think, in some geographies we already launched.
Yes. We have already launched the product in different geographies like Brazil that we are starting our sales now in January. The perspective is excellent. We have the first launches in standalone products, but we have many mixtures coming on. A very interesting perspective because CTPR plus our solutions, actual solution like the Perito, Experto and other products have an exceptional combination together with our NPP solutions. So we will offer a very broad portfolio and we can solve the caterpillar problems, we can solve the bugs problems. We will have a complete product portfolio. This is to be a very important addition to our portfolio in the next months.
We have several countries that will come step by step during the next months.
Thanks, Carlos. The expected net debt reduction from FY 2021, the value.
About $350 million-$400 million, as I shared with you, of which $125 million was paid this year in this month.
Can you give some sense on exporters of agrochemicals from China? We believe they got impacted because of dual control in quarter three, but how are things playing out now? Do you expect any fall in AI prices?
If you see, I mean still there are some molecules which are still at a very, very elevated price levels. There has been some softening, but if you see commodities, I mean, whether it is coal or crude or, you know, solvents, they are still two times, you know, the nine months back levels. With a cautious optimism, I can say that, you know, we still see for next two quarters there some softening, but largely, you know, some of the key intermediates and products from China would still be at a high level.
It will not be back to nine months back level, that's for sure.
Thanks, Raj. The core interest on borrowings is down to INR 361 crore versus Q3 cost of INR 393 crore, down Q over Q. Is it because of the low interest rates or the net reduction in the debt?
It's a combination of both. We have been reducing our debt. As you see, last year also we reduced our debt by close to about $500 million. This year, from beginning of the year till date, we have done two tranches of sustainability loan. Actually, these loans were taken to, and we repaid with the money the acquisition loan. The loans were taken at about 35 anywhere between 25-35 basis points lower cost of borrowing. It's a combination of both, reduction of debt out of last year, at the same time, reduction in interest costs on the fresh loans taken, which were used to swap the acquisition loan.
Thanks, Raj. Can you let us know in how many countries have you deployed biosolutions?
We have deployed in the 138 countries that we are present with our sales force in the field. We are now on the NPP perspective, for every country and region, we are defining a special team that is working focused on that. We have been able to really transform some of our products in a global blockbuster that was more localized, and now we are expanding that for all over the countries that we are present. Answer a little bit about your question before about the importance of the go-to-market perspective.
I'd say our go-to-market perspective like, this, Sinagro, approach, like, the approach that we have in many other countries, to be closer to the farmer is to really being able to demonstrate our technology. Because our technology of, NPP, combined with our chemistry, gives the sustainable solution, what we name Produtiva. We are applying Produtiva approach all over these 138 countries, that we are present in the field.
Thanks.
Thanks so much.
Could you elaborate on the INR 500 crore receivable of insurance claims in South Africa? What is the delay? When is it expected? And does the company have any forecast on the timing when this should be expected?
Well, we are engaging with the insurance company. We have filed the claims. We expect, probably, I mean, we are working towards getting it by Q4 within this financial year. However, you know, I cannot say with any certainty, but efforts are being made to get the claims before the end of this year. Sorry, Raj, do you want to add something?
The expected revenues from the new product launches in quarter four and the coming year, FY 2023.
I'd say, we are really focused on transforming our business into value-added more and more, a differentiated portfolio and sustainable portfolio. Our goal to be 50/50%, sustainable and differentiated 50% and post-patent 50% by 2026 full year. It's going on. Potentially we achieve that earlier than that. The new launches that we are having now is giving us the possibility to grow disproportionately higher the differentiated products. See, most of our growth is coming from the differentiated products instead of our post-patent products. Our biosolution products is growing very well, too. I'd say. Another very important point is we have granted our patents related to the platform that we have developed.
We have V10X MMX, and our patents have been granted during 2021, and we have many other patents applied for that platform. I'd say our drive to really sell differentiated solutions is there, and we are combining the differentiated solution with our biosolution. That is giving us the possibility to really differentiate us in the OpenAg approach from the others. Now to reimagine sustainability, selling that productive approach. I don't know.
Thanks. Are we looking for more tie-ups with innovators like FMC? There has been a lot of disruption which has happened in the supply chain. How are we evaluating the outsourcing opportunities?
The whole OpenAg platform is about open collaboration. As we go further towards a solution-based approach, we believe that collaboration is the right way forward, because we are moving away from a products company to a solution company, and we will provide the best solutions to our farmers across the world. That's a continuous process. Today, we have more than 70 projects under evaluation with different organizations.
Okay. There's a question on the CapEx guidance for the coming year.
We spend about $330 million. This year we have budgeted for about $330 million. I think we'll be lower. Our spend will be lower than that. We will continue in that range, about $300-$325 million. This is both CapEx for tangible, that's setting up manufacturing capacities, as well as for product registration.
Can you provide the contribution of price increase in glufosinate to the overall gross margins during the quarter?
Explain that.
That won't really be possible to do it for one of the products. I think some of the people could not hear the factoring number is what.
Wanna repeat it just.
Yeah.
Yeah.
Give the factoring number. Yeah.
I can repeat the factoring number. We ended this year, I mean, as of December, the total factoring that we have done is in million dollars it's about $945 million. In rupees it's about INR 7,175 crores. As against this last year, December, we did factoring of INR 4,570 crores. In million dollars it was roughly about $625 million.
Thanks. How are the channel inventories across various geographies? Can this be an overhang for FY 2023?
Carlos?
Please, can you repeat, Radhika, the question? Sorry.
Yeah, sure. It's how are the channel inventories across various geographies? Can this be an overhang for FY 2023?
I'd say the channel inventory this year is one of the lowest in most of the geographies because of this disruption that have happened. Many herbicides, the inventory is quite low. Except in this situation where you have this severe drought that potentially the market will face some inventory in these southern corn, south corn region like Argentina, Paraguay, a little bit south of Brazil. In the overall market globally, the inventory at the end of the year will be very much below than last year.
I think we'll take one last question. It seems that the quarter three actually had an inflow of working capital, which is remarkable given it's normally a high working capital usage quarter. Can you please explain? Do you still expect, as usual, a large working capital release in the fourth quarter?
Talking about the fourth quarter, certainly we expect a release of working capital, as has been the case for the last few years. That's been the trend. I think as I mentioned in my earlier comments, we are bringing in a lot of efficiencies in working capital management. There has been focus on reducing inventories. There has been focus on, you know, collections, especially the overdues. Almost at every monthly management review, leadership spends time on what is the status of overdue collections. With this increased focus, as well as on the payable side, we keep pushing our vendors to give us longer credit terms. As we are one of their larger customers, we keep pushing for getting better terms. This focus on working capital continues and that is.
We will continue to do this as we move forward. That's something which is ongoing. We have taken also several projects on what we call as S&OP projects, which are of planning and demand planning and distribution of products. Some of these projects also helps us to keep bringing more efficiencies in our working capital. Raj, you wanna add something here?
No.
On the inventory side?
No, that's it.
Okay. Thanks.
That was the last question. Any closing remarks from your side?
Thanks. Thanks, everybody for joining us on this call. In case you have any further questions, you can reach out to Radhika or myself, Anand Vora, and we'll be happy to answer the questions. Thank you once again for joining.