Q1 21/22

Jul 30, 2021

Ladies and gentlemen, good day and welcome to UPL Limited Q1 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Radhika Arora. Thank you, and over to you, ma'am. Good morning and good evening ladies and gentlemen. Is there enough? Yes, ma'am. Please go ahead. Thanks for joining us today for the results for the quarter ended June 30, 2021. On this call, we will be referring to a presentation that has been shared with you is also available on our website. And we take as having read the Safe Harbor statements. From the management, we have with us our Global CEO, Mr. Jay Shah Group CFO, Rajendra Tarak COO, Carlos Pellicer Global CFO, Anand Vohra Raj Tiwari, our Global Chief Supply Chain Officer and Faruk Hello, Chief Commercial Officer. We will start with an overview from Jay followed by a business update from Carlos and a financial update from Anand. With that, let me now hand over to Jay. Over to you, Jay. Thank you very much, Radhika. It's a pleasure to be On the call, the quarter has been challenging in many ways. We've seen a huge Cost increase across the board in raw materials and in freight charges. In spite of that, I believe the team has delivered Fantastic performance, particularly in the circumstances of so many weather impacts, which Carlos will go through. I think the team has done an excellent job, and we see the prospects for the full year to be very promising. The India business has done very well. The U. S. Business has done well and performed much better than last year. But the weather impact in Latin America, China and Europe has slowed down some of our growth in the Q1. Thank you very much. And I'll hand over to Carlos and be waiting for questions after. Ladies and gentlemen, thank you for patiently waiting. The line for Mr. Carlos Felicero has got reconnected. Thank you. And over to you, sir. Thanks so much, Jay. Good evening, everyone. I'm pleased to join you today and present our financial Intensified by the extended pandemic across the world, we have continued to deliver our commitments during this period. Our OpenEdge purpose inspired us to be agile, to focus deeply in our customers and to grow sustainable. Asimplified by the prestigious Asian Supply Sustainability Leadership Award for displaying Commendable commitment to sustainability. During the 2nd week of July of 2021, Unfortunately, incident of political reotics and larceny were reported in South Africa. The reorters Firstly, gain access into one off warehouse rented by UPL situated in Durban, South Africa In attempting to loop an ultimate towards the warehouse, due to Despite a significant portion of the warehouse and how you feel on inventory were damaged, fortunately, There were no causality or major injury to report. We have engaged the service of Global Renewal to Industrial Cleaning Service Providers, Environmental Specialists and other solutions to assist The local authorities managed to deal with the aftermath of the incident at the warehouse. I'm grateful For all the effort made by our team and partners in this semi difficult circumstances to protect the community And the environment. We believe that the damage to the totally coverage by insurance And the calculate of the exact damage value is in progress. And I'd like to thank to our relationship with our customers And to our supply chain team that have been able to manage and minimize and mitigate The business impact. We are with a good way to manage the relationship with the customers and be able to manage properly all the profits. Our financial results, I'm glad to report that the revenue as well as EBITDA for the quarter improved by 9% each. The increase was supported by strong value growth, favorable mix and price increases. This has led to an improvement in gross profit by 50p. Despite Unfavorable weather condition across several regions coupled with supply constraint and increased cost pressure. In addition, our net working capital was around 91 days, approximately 7 days higher than Q1 full year 2021, Primarily due to higher inventories that have been created to support our growth In Q1 and Q2, we also remain committed to continue to reduce our debt. Overall, we maintain our full year 2022 outlook as highlighted in the Capital Markets Day presentation. Based on our robust customer centric model, integrate manufacturing in our open ag approach Despite cost pressures in our order external challenge. Now Let's look at our overall performance highlights for the quarter. We are happy to report that 3 out of 5 regions, LATAM, North America and India delivered strong growth in the quarter. Europe and Rest of the World were impacted by unfavorable weather conditions, resulting in a shrink market and pockets as well as supply constraints. As part of this impact was offset by a higher price realization and strengthening of euro against the India rupee. Overall, we achieved 6% volume growth, 2% price growth and further 1% Upside due to currency movement. Improved gross margin were led by better price realization and favorable product mix in most geographies. This comes despite increased overall cost pressure As well as delay realization of price, correlation to the pre book orders An unfavorable mix, especially in LATAM. Fixed overheads were 11% higher than previous years, Primarily driven by the increase in personnel expenses and lessening COVID restriction. Despite All the external challenge and increase in overheads, UPL managed 9% increase in EBITDA versus previous year. Now let's take a look on the overall performance of our regions. In LATAM, we saw strong revenue growth, especially in Brazil, led by higher volumes. Among other Major markets. Mexico was impacted due to several ongoing drought. As I also mentioned earlier, The deal was impacted by cost increases and delayed price realizations due to Pre book and order and unfavorable mix in Brazil. In North America, higher volumes Led by growth in post patent solutions coupled with a strong overall price realization, driven robust growth of 19% over Q1 full year 2021. This was Aided by favorable commodity prices, a strong seasonal outlook and increase in acres of most of major roll crops. Further, favorable price realization has also Help inadequately compensating for marginal cost increase, resulting in an improved profitability in the region. In Europe, unfavorable weather conditions result in a shrinkage of key markets, Especially in the Saulte Me region, further, non derogation of and competition from generics UPL exhibited strong performance in this quarter despite delayed monsoons In parts of the country, several impacts of COVID From a second wave in April May and delay upward price divisions, this was partially offset by favorable commodity price for food grains and key cash crops and posts. 2018 Base Brands, Ferio and Sweet Power demonstrated strong growth quarter to quarter growth, Supported by the very high price realization. The rest of the world Witness around 14% dip in revenues versus last year, negatively impacted by unfavorable weather, Such as the frost in China and supply constraint leading to decreased volumes. In South In Asia, we are fortunate in sales in Vietnam face challenge due to supply constraints, but we are offset by increased sales in Thailand. Further, the positive supply constraint and unfavorable weather conditions impacted Sales in China. Japan sales were down versus Q1 full year 2021 Due to the lower realization in health and nutrition sales in Japanese yen depreciation. I would like now to talk briefly about our recent announcement And exciting new launches through our Open Ag, we continued our path of reimagining sustainability With an open network to create sustainable growth for all, no limits, no borders, We are proud of our recent launch of Natural Plant Protection, our NTP, and nurture farm to further enhance farmer resilience and sustainability. As announced in June, Natural Plant Protection, our NTP, is a new global business unit that house our complete portfolio of natural and biological, delivered agriculture inputs and technologies. NEPT shall be a standalone bank consolidating UPL existing biosolutions portfolio, Network of R and D Laboratories and our facilities worldwide, Natural Plant Protection, Our entity, we will work across UPL's global footprint to shape In scale, the biological technologies of the future. The strength of NPP That it will be a catalyst to our progressive approach to sustainable agriculture. Meeting the innovation In the technology needs of our farmers, consumers and environment, Natural Plant Protection, you play a very important role As we have our micros that create micro impact with macro impact. Nartalfarma, launched in July, is a digital platform that advances resilience for farmers and the food system, Make agriculture simple, profitable and sustainable through technology led solutions For generations to come, covering every step of the farming life cycle, Metro Pharm will operate as an open platform in the supply of products, innovation and mechanization. In case you wish to learn more about Natural Plant Protection, our NPT and Nurture Farm Launches, please refer to the links of videos provided in this presentation. Before I hand over the call to our CFO, Anand, to provide more details about our Q1 financial results, I would like to recognize our team for their resilience and dedication in ensure This strong performance in Q1 and launched these key initiatives as NTP and Nurture Farm Despite multiple challenges on several fronts, thank you and over to you Anand. Thank you. Thank you, Pavel. Before taking you good evening and good morning, good afternoon to all of you. Before taking you through the key numbers, we take as having read the Safe Harbor statement, which is a part of the presentation. I'll begin with providing you the key highlights for the Q1 earnings and then take you through the detailed financials. The Q1 provided us a good start and added the momentum to growth in revenue and EBITDA As we work towards delivery of our commitment for the current financial year, we are seeing very strong crop prices in our key markets, while also experiencing challenges on weather in some geographies and supply chain pressures. Besides all challenges, we did deliver 9% revenue growth over last year same quarter with a volume growth of 6%. We saw our price increases had an overall positive price variance of 2% and the currency variance of 1%. EBITDA grew by 9% for that of the same quarter of last year. I'm pleased to say that we are on track to deliver on our commitment both on revenue as well as EBITDA. Talking about the key financial metrics, we ended the quarter with revenues of INR 8,515 crores And an EBITDA of $18.60 per share, an increase of 9% in both. The net profit for the quarter was INR 6.78 crores, an increase of credit fee per share over that of the same quarter in the previous year. Gross margins were higher by 50 basis points and stood at 44% against 43.5% in Q1 of last year. The margins expanded mainly due to better price realization and product mix Despite increases in supply chain costs and other increases in costs of raw material and intermediates and the logistic costs. For the quarter, the fixed costs were higher by 11% as compared to the corresponding period of the last year. This increase was largely on account of increased investments in resources as we move our business to Sustainable and differentiated products and the launch of NPP and NERJA palm as mentioned by Carlos earlier. During the quarter, we had an adverse net foreign exchange impact of INR 202 crores. This was due to the mark to market impact of hedges taken on advanced orders in Brazil. As a normal industry practice, we booked significant business with our customers In the 1st 4 to 5 months of the calendar year, the hedges ensure that the company's realization in Geared's order are protected. Further, these hedges enable us to offer a committed BRL rate for the products irrespective of the moment in exchange, visavis the U. S. Dollar. During the quarter, there were significant appreciation of BRL by 12% As the hedges are taken on advance orders, which we would be executing in the subsequent quarters, The MTM or the mark to market will wind down with the execution of the orders That INR 200 crores MPM of these hedges has been recorded as a part of the finance cost, which is attributed to the timing mismatch between the quarters. I would also like to state here that we have close to $500,000,000 of advance orders, which we have received in the 1st 5 months of the calendar year in Brazil. On the tax line, deferred tax asset was created in line with the normal tax computation, which will get adjusted as the year unfolds. These deferred tax assets primarily from Brazil and Europe. The full year tax rate is expected to be at the lower end of the guidance of 15% to 18%. Exceptional items for the quarter of INR 63 crores were largely on account of Certain additional costs that we incur on the closure of our Rotterdam manufacturing facility. Net profit for the quarter stood at INR678 crores versus INR 560 crores, showing a growth of 23% for that of the previous year. Moving on to working capital. In line with the seasonality of business, where working capital builds up in Q3 and then releases in Q4. The net working capital stood at 91 days, higher by 7 days compared to last year. The payables for the quarter increased by 7 days, while inventory increased by 12 days and receivables increased by 2 days. We expect the net working capital base to stay between the 80 to 90 days range in the current financial year in line with the increased interest rates. Moving on to cash flow and debt position. As informed earlier, our debt obligation is being served efficiently, demonstrating our commitment towards our bankers and stakeholders at large. And we remain committed to reduce the debt and maintain the investment grade rating of the company. During the quarter, Fitch rating and S and P Global rating, we gained the investment grade credit rating for UPM, which also upgraded its credit outlook to stable. During the quarter, we also borrowed $250,000,000 of sustainability loan, taking the total sustainability loan $2,750,000,000 which was completely used to repay the acquisition loan, which we had taken earlier. The acquisition loan now stands at $1,500,000,000 The sustainability loan is a 5 year bullet repayment loan, which was borrowed at 30 basis points below the acquisition below the cost of the acquisition loan. The cost of sustainability loan is at LIBOR plus 130 basis points and has the potential to provide And another 5 basis point reduction on meeting the sustainability KPIs agreed upon with the investors. The gross debt and net debt stood at INR 25,099 crores And the net debt stood at INR 21,467 crores. As regards to the outlook for the full financial year, We believe that the price correction, higher proportion of differentiated and sustainable products and strong demand growth It enabled us to deliver strong results going forward. I would like to reiterate that we maintain our guidance for the financial year 2022 of 7% to 10% revenue growth and 12% to 15% EBITDA growth for the year. With this, I would like to hand over back to the operator and me and the senior management team are ready to take Questions? Thank you very much. We will now begin the question and answer session. The first question is from the line of Niranjan Sakhalkar from My question is to Anand. I wanted to understand why is the cash flow operation for this quarter lower than the YOL basis Despite our revenues and EBITDA growing? Well, Nirajan, as we build up the equity, our working capital Has gone up and as we build up our inventory for the next two quarters, The working capital typically takes up the cash flow, which we generate during the month during the quarter. So it's largely because you will see that the working capital ramps up in Q2, Q3 and you will see despite Positive cash flow coming from operations, but at the overall level, it gets invested in working capital. Okay. Yes. Thanks a lot. Thank you. Thank you. The next question is from the line of Tan from Old Bridge Capital. Please go ahead. Hello, Dean. Good evening. Three questions from my side. One, in LatAm, excluding Brazil, How has the overall market behaved and have you lost market share there? Carlos? Yes, yes. Overall, the main constraint in LatAm was in Mexico because of the drought, Train in LATAM was in Mexico because of the drought, several drought, very several drought in Mexico. And but our LATAM business is quite good. We have not lost market share. We have even Progress well in some countries like Chile, Paraguay and other countries, We have what have been the impact for us is we have a very good business in Mexico and the drought in the first quarter that have impact More our sales there, but the impact For the market, it's not for us especially, but our growth in Latanya was good and we have not lost market share. Sure. During the commentaries of viewers, they seem to have suggested that Europe, the season was My sense is the target territories are different. So just wanted to get some sense in your target In Europe, how has the market delayed? And how is the uptick on the biosolutions business there? Yes, very good question. And we are on track with our biosolution approach in Europe and the disruption that is happening in Europe in terms of product mix changing And now this the Q1 have been impacted because of the frost. But What we are we have been able is to create solutions that replace what we have lost. We have been very successful and an example for that is our Argus, Our solution to Sprout, that one product that we used to sell that is CIPC That was a solution to control sprout in potatoes. We have been able To launch a new solution to control sprouts in Europe that The value of that solution is 3 times more than the value of the solution that we was selling before. And let's say for us, the challenge that is happening in Europe in some way is giving us a lot of opportunities. And we are launching new products. We are coming with new solutions. And This quarter of Q2, you'll be starting a good way for us. We are seeing Good growth. We are with this customer centric approach really focused in creating solutions To the pinpoint of the farms, and this is what we are doing. And I have been visiting like Together with Jay, we have been in Poland last month and the results of our solutions there is amazing. We have been visiting Apple Pharma that is using our vaccine plan. That is a vaccine to control disease and control to make the plant more health in Many different crops. And for Apple, this farmer that we visit is our productiva farm. We have been able to apply 6 times our vaccine plan and close the crop without disease And without any residual in their crop, let's say, it's really it's moving good and we are very excited about The opportunity that is the disruption is happening in Europe and our pipeline of solutions of NPP It's coming and will help us a lot to grow in Europe. Thanks, Carlos. Just the last one, guys. You seem to be gaining some decent traction in your non agro business in India. Notice in FY 2021 or FY 2020 it's grown about 30% and the trajectory seems to be similar in Q1 FY 2021 over FY 2020. So if you could Just a little bit what is this business all about and what is your outlook for it? Actually, I believe that Jay, Jay, can you talk about that? Yes. The specialty? Yes. Thanks. Yes. So you've been UPL has been building out a specialty chemical business, pharma intermediates, etcetera. We Ancillary to our existing feedstock of raw materials, which we do and that business is growing nicely, we are seeing Actually, quite good growth rates in that space. And we have some investments also In the last 2 years, which are all kicking in and giving us revenue growth, we believe that business will continue to grow A lot of it is intermediate for pharmaceutical industry and other ancillary industry not necessarily at chem. Okay. Thank you. Thank you. The next question is from the line of Girish Achitalya from Morgan Stanley. Please go ahead. Good evening. Thanks for the question and opportunity. I had a couple of questions for Anand. So firstly, on the STACK effects, I hope you didn't understand that Brazil and Europe, Is it something which is one off here? Why should it reverse then subsequently with this Brazil and Europe Have contributed this way in a big way even historically. So what's really happened in the tax rate level that's fine? And second, if you can just quantify the BRL impact out of the 200 odd crores because we had about 177 crores impact Just wanted to understand what's really changed? Sure. Thanks, Girish. Girish, on the taxes, It's just that based on the quarterly numbers and with the mark to market impact, even last year, we had a Negative, so to say, deferred tax asset, which was created in Brazil. But then in other regions, they did well. And therefore, there was The net impact of tax was a provision for taxation. This year, because of the large impact coming out of mark to market, We had to there was a larger deferred tax asset which got created. And also in Europe, as you saw, we Our sales were below the last year's sales. And therefore, the cost obviously, the cost of operations and other things are there. So that gave us some benefit of creating and which resulted in creation of the deferred tax assets. But as I mentioned in my commentary And as we move forward into Q2 and Q3, you will see the reversal of these deferred tax assets As we in case of Brazil, the orders get executed, then they will be converted into sales. And in case of Europe as the business picks up in largely in Q3 and Q4, you will see the reversal happening on different tax assets. So that's on the taxation part. And your second question, which was with regard to the FX, As you would as I mentioned in my commentary, we saw a 12% appreciation in Brazilian real From 1st April to 13th June, it jumped up from 5.6 dollars to 1 dollars To $5 to $1 although we are back at $5.2 But as of 30th June, There was an appreciation of 12% in Brazilian real in that quarter. Besides, as you know, the business From Jan to May, June, we collect advance orders. And as I mentioned in my commentary, We had advanced orders in excess of $500,000,000 We have taken NDF and put options To hedge our advanced orders, as I mentioned in my commentary that this helps us to protect our dollar profits at the same time Dollar Margins, at the same time, it gives us an assurance to the customer that they will be getting the products to the price at which they have booked. So it's just a mark to market on these orders. And as the orders get executed in Q2 and Q3, you will see That those reversals would happen as we move forward. So it's just as I mentioned, it's just Mismatch timing mismatch, Q2 rolling over into Q3 Q1 mark to market rolling over into Q2 and Q3 As we execute the orders, this would get nullified. So, Anand, I just wanted to understand the Q Y o Y variance because Even in Q1 of last year, you had a similar situation. So have you booked much higher orders and hence this is becoming bigger? Because even if I look at FX impact slide that you have put out, the number is 202 versus 177 crore versus last year. So It's a INR 30 crore move that is. So we're talking this INR 30 crore delta, right? Or some other regions would have Positively contributed to that delta being lower? No, I think it's It's largely coming out of the excess orders that we have got this year, 1. And 2 is last year we didn't follow this practice of Taking the hedge, as you know, we had shared with you last year, we did get impacted because we had the advanced orders for the currency Depreciated significantly during this quarter. We saw almost like a 30% depreciation, which happened in the currency. This quarter is won the other way around, but we in order to protect our Setting price to the committed selling price to the customers and also in order to protect our profit margins, we adopted this derivative strategy. And typically, this you would see this phenomenon in 30th June quarter ending 30th June because that's when we will have the Peak advance orders. Once those orders are executed at the end of Q3, Q4, you would see that this coming down significantly. Thanks. My last question, Carlos, just if you can spend a minute on sustainable solutions growth during the quarter And what target do you have for the growth of Sustainable Solutions business in fiscal 2022 in the Underlying growth that we're talking about 7% to 10%. And just if you can comment on the European market share, are we flat or are we down a little bit given the Changes that are happening on the product side over there? Sorry, I was in mute. Thanks for the question, Denise. Looking to Europe, what is happening, say, we have lost Registration like the CIPC and we replaced that technology to Sustainable Technology, that is Argos. In that way, we reduce our sales of chemistry and we increase Our sales are sustainable. And this is what we are doing with all the products We have had impact. In Europe, We are working very, very deeply on the on gain speed On the penetration of the Bayer Solutions, in our growth of Bayer Solutions, it will be Almost the double of the growth of our normal solution. If we are looking to grow in the range of 7% to 9%, our growth in BIOSOLUTIONS will be disproportionately bigger than the growth In the chemicals side. And we are seeing this all over the Europe. It's not just one country, but all over the Europe. And we are quite dedicated on that. We are putting more people in the field to say biosolutions Demand, much more work is a much, much more profitable business. Even in Europe that we have already a very good Business BioSolutions is more profitable, but it means more service, it means more work in the field. And for that, we are adding additional resource In sub countries to help us do to help that close. But to answer your question, We will grow more in BIOSOLUTIONS. And in general, we are gaining share In Europe, because the market is stable or de grow A little bit in Europe and we are gaining share because of our sustainable solutions. And we will see more that in the next years now because new solutions are coming, New registrations are coming. And our footprint that we have in terms of manufacturing That we have in Europe, that we have in South Africa, that we have in Mexico, That we are building in India, it's healthy us to do that because when we see The demand increasing, we will need more capacity too. We have a good capacity today, But we will need to keep focused on the pipe because The growth of the sustainable solutions, you'll be disproportionate like software. Now our software footprint, we have a very strong Software footprint, we are a leader in software globally and we will see this solution, The HIC solution, the diverse so we are developing a lot of diversified type of So we cut for us for another buyer solution. Our product yield approach, so that you give us Thank you. The next question is from the line of Ritesh Gupta from Kotak. Please go ahead. Hi, thanks for taking my questions. Just on the NPP side, what is the likely revenues of this deal, You could share that. And would it be like it will be launched like a separate brand or eventually, let's say, Could it also track some 3rd party investment as well as a separate platform? So if you could just highlight that a bit. And then on the Europe side, in terms of I couldn't follow, I think Carlos did talk about it, but I think what is the outlook for the rest of the year in India, especially has grown materially faster while the sewing, etcetera, has been running behind expectations, So or at least running behind, so what's outlook for India are you guys with there? Yes. Ananda, in terms of the Can we disclose that number? How will you see that? Yes. I think We have shared with the investor community that our sales from the Bayer Solutions and the NPP range of products, Which we have now regrouped under the brand of NPP is in the range of about $350,000,000 to $375,000,000 per annum. And this year, we expect that to grow at a faster than the normal growth rate of ours. I can only say that because we are in the Q1, But our internal targets are to provide a faster pace than the normal business. So That's almost on the numbers, but please go ahead and the qualitative piece you may explain to. Yes, yes. I'd say In terms of India perspective, we have had a very, very good Q1. Q2, we are monitoring and working, let's say, that are have had a delay In vain and I have now it's raining a lot. It's a we are very close to the customers. We are supporting them very close to the retailers, to our distributors. We We expect a very good year, because technology wise it's increasing a lot. We are seeing a very good perspective. The point that we need to work is the weather. I'd say the weather Conditions that will be important to monitor now, but we are with a lot of new products launched, we are Our glufosinate technology, it's moving very good values And all the other brands that we have in glufosinate are moving good. We have launched our cliclodine. It's first time That's Cletadine. It's sold in India. We have sold our proper new. It's first time that proper new is sold in India. See, we have bought our AAA mixture. It's the first time that AAA mixture is resistant in India For seed treatment, and there are new products coming in this season. There are a lot of new product launched in India And our platform, our ecosystem to work in India is so strong that say we are really gaining share And we are progressing quite well in India. Thank you. Thanks. That's helpful. Just one bit on the gross margin side, you saw YOY, bps of YOY expansion about 50 basis points. And So how should we see it in the subsequent quarters? Because I think you will be I mean, so one is on the price hikes that probably need to be taken or probably have been taken and yet to come into the numbers. And secondly, on the logistics cost, I mean, could you quantify what kind of logistics cost impact would be seen and Now how that should evolve over the rest of the year? Yes. We are expecting now that In our price increased and we are we have been able to increase our prices And we are continually increasing monitoring the cost and the price now. And As the price of commodities are so good, farmers are making money, have been good for them. There are That the company have done during the last 20 years on the manufacturing side, now it's coming to us in a very good momentum because I'd say so many companies have closed their factories or have stopped There's a transfer, they structure to China or some other countries and we have done the reverse. Now we have invested in manufacturing. We have invested in our supply chain capabilities. We have a very, very strong team on supply chain now and in our manufacturing capability. This is giving us a very good momentum that constraint of some products and cost increase Some raw materials, as we are so much tech integrated, we are able to play In the market now and be able to have product availability and be less impacting costs than others. And this is why our margin have improved in Q1 even though we have old orders, We have all this situation. We have improved our margins in Q1 and we are expecting the same in the next in the following Quartus, this is the reason why, let's say, I believe Jay have been so resilient, the company have been so resilient In keeping the manufacturing focus and keeping the manufacturing footprint, that is, I believe fundamental to the business model that we have. So should we expect the gross margins to sequentially improve in the subsequent quarters? Yes. We expect that we will be in track with our Announcement that we have done in Capital Day, say we are keeping our perspective exactly in line with that Thank you. The next question is from the line of Prabhul Sainte from Centrum Broking. Please go ahead. Thank you for the opportunity. Am I audible? Yes, you are. All right. So just on the weather conditions that you spoke about quite a bit With respect to Latin America and as well as Europe, in Latin America, is it fair to say that in Brazil, the First half of the sowing season is something that is has obviously not gone as planned. So What would be the monitorable one should look at to measure whether the second half of the sowing season or the rainfall that starts from September, I believe? That is actually performing as per expectations in order to sort of meet our Latin American revenue guidance or The growth guidance that we are talking about right now? Yes. I'd say, when we see Brazil, The 2nd season of corn have been impacted by Some drought, what we named saffron, the corn that we have been planted in February, March. This year, the planted soft corn have delayed a little bit Because you have delayed the planting of soybean last year. Soybean delayed 30 days and then the following I have delayed 30 days too. For us, soybean is by far much more important than And soybean prices are so good this year that we will expect I increased in planted area of soybean in Brazil and South Cone. We are seeing already a very good year of Soybean in North America. And the stocks that low, the inventory of soybean is quite low globally. We are seeing that the price of soybean will be keeping in this range between $13 $14 per boost. And this is exceptional price, exceptional price. Before COVID, the price was in the range of $8.8 per bushel, dollars 9 per bushel. Now we are in the range from $13 to $14. Let's say Farmers will invest a lot in the crop. They will try to capture as much yield as possible per hectare. Exchange rate in Brazil and in South Cone, Argentina, Paraguay, It's quite good to the pharmaceutical. It's a we are not seeing any Weather prediction that we will come with a problem for soybean in that area. Say today it's too early to say that. The soybean will be start planting in the end of September in Brazil. The first regions we will start about 20 September. But up to date, we don't have anything that creates Any, like I say, point that put in risk the starting of the crop And the expectation is the increase in about 2,000,000 hectares of soybean just in Brazil that the planted area will be increased. This is very good for us because our portfolio in soybean is very, very strong. All right. That's very useful. Thank you. And the second question again was on weather this time in terms of the Indian market. Obviously, you have done perhaps much better than Estimates, because of stronger pricing realizations from what the briefing was earlier. But the A delay that happened in June in terms of monsoon through to the 1st week of July, do you see that as At least a permanent impact, at least for FY 2022 with respect to Khareeb Sewing and does that have an impact on our domestic business, At least for Q2 before the second half of Rabi showing actually starts from September, October? Yes. We have here in the line Farooq, that is our Chief Commercial Office. I would request to Farooq if you can explain that you are so close to the market there. And can you make some view on that? Yes, sure. Thank you, Pallav. Could you please repeat that question, please, one Yes. I was wondering that the kind of delay that's happened based on some whatever we little can understand that Some of the delay in sowing is not something that can be captured back at least as of now, despite the fact that rains have actually picked up Post the 2nd week of July. So does that impact our prospects at least for Q2 before The impact of, let's say, Ravi showing again starts to show up in our growth numbers. That was my question. Yes, you are right. Basically, there are some Areas in MT where we have lost out on some acreages of soybean, but then what we have been doing in the last 3, 4 years is that Whilst we are looking at the big crop, the big acreages, we have also started work on looking at At the small crops, small but very niche, very specialized crops like ground nut, like pomegranate and all those kind of All good and aprops. And what is secondly, what is helping us also is this pro Notiva concept That we are going with in certain geographies where we have the adoption of the entire farms, Entire villages in that particular for that particular crop. So yes, we would have some impact When it comes to acreages for crops like soaping, but we don't see that impacting our Q2 or Even the full year, basically because we have a mitigation plan in place where we will catch up on those losses With the other crops that we are focusing on. Great. One last question, if I may. With respect to the impact of Freight, supply constraints, as well as some increase that has been seen in raw material prices from China, any view on how the rest of the year would plan out on these fronts? I'm sorry if you covered it earlier. No, no. Thank you for your question. We have Harsh Tewari, our Supply Chain Manufacturing Head, he can give a brief for you on that And we are quite on track on that. So, Harsh, can you pick up this question? Yes. Sure Carlos. As far as the logistics cost is concerned, Going forward, I see the cost at a similar level for next three quarters. There has been universally, there has been especially in the ocean trades, there has been an increase To the tune of 15%, 20%, some rooms even 25%, but that is going to stay. And that in my view, that will not Now further go up or we remain stable there. As far as the cost increases are concerned, there has been Some cost increase on basic commodity, but also some corrections which has happened. And also in case of intermediates, since most of the product what we make ourselves, we are also backward integrated, so not Much impact, I mean, there has been an impact because of basic commodity chemicals, but not on account of Large price increases, what has happened in intermediates in China. There has been also, For example, glyphosate and a tick that has moved very, very rapidly up in last 3, 4 months. But glyphosate as such, it's not a big molecule for loss. There has been an impact, but for us the impact has been less as compared to any of our PL groups. All right. I have more questions, then I'll come back. Thank you so much for your time. Vishnu Kumar from Spark Capital, please go ahead with your question. Thanks for your time, sir. This question is for Carlos. I'm circling back on the same question on the weather in Brazil. I understand about the The Afrinath corn that you spoke about and the Southern Brazil going under stress. Would Mato Grosso, which is a key region for our soya crop, Does it depend more on rainfall or more from a reservoir level? Because we understand even the reservoir data that is coming out of Brazil is So in some phenomenally low water levels there. So would that be at a risk if the following range don't really show up that Prasil probably may see some stress. Perhaps in the second half. No, thank you. Thank you for the question. And And I'd say soybean in Brazil is so interesting because we have From the Rio Grande do Sul that is very south of Brazil up to almost Amazon, that is very, very north Very wide from Bolivia, almost Bolivia to Minas Gerais is a very wide and very long, let's say, country. The weather can be more dry, more wet in other regions. But in average, the soybean, it's quite sustainable in Brazil. Mato Grosso It's the main state in weather in Mato Grosso used to be very regular, very, very Like I said, you can delay a little bit to start rain or have a little bit of shortage On the end of the call, but it's amazing that it's not aggregated area, but it's able you are able to do 2 seasons. 2 seasons of 1, for instance, soybean followed by cotton, As Safrina Cotton and 1st season is soybean and 2nd season is corn, say 2 seasons In a non irrigated region. So it's Mato Grosso is really Perfect for Avicom. The soy is good and the farmers are so techified. And What happens every year, say, some of these start showing in 2015, 2020 Of September is when it's allowed to start the soy planting soy. It's Before 15 September, it's not allowed to plant soybean in Brazil, all over Brazil. Starting from September, that is allowed to manage disease control So one season with an order. And normally what will happen is worst case scenario that We expect to start planting 15 September, we start planting 30 September or 1st week of October Well, it's the worst case. Like last year, instead to start 1st 15 September, it started planting in 2nd week of October. See, but the weather, it's quite good. And we don't have any predicted What we expect here is that the planted area in Mato Grosso could increase Quite a lot this year because of the excellent price on cotton, corn and soybean. The 3 crops That is the main crop for Matoboros, the price is exceptionally high, Almost $0.09 for cotton, dollars 5.5 per bushel In corn $13 to $14 per bushel in soybean seed. Lot of growth this year will be like The farmers are making so much money and even have this drought in corn, the farmers can make a lot of money this year In Mato Grosso, all over Brazil, but especially in Mato Grosso. Got it. No machines at this time. No machines, they are a big line, a big queue on the machine supply because the farmers are buying machine, We are buying cars, we are buying because we are making a lot of money. Got it, sir. Just on the U. S. Market, again, There's a lot of broad news that we keep hearing on the Midwest. I understand that the season is already almost over another maybe month or so. How is the current inventory situation there? Is it okay or more from a next year standpoint, how do we see that? Is the market okay or are we are inventory building up there? No, the inventory is quite low. No, very quite low. In North Europe and USA is where the inventories are the lowest. And as the price of commodities are so good, the fact that we're deploying technology and The inventory is good. The inventory is very low. We have been able to increase price quite a lot in U. S. Because of the inventory is low and we have been able to quickly adjust our prices there It's moving very good. I believe North America would be one of the best visions for us this year. And we have improved our footprint there too. We are closer to the farmers. We are closer to our dealers, our partners there. We are quite confident in the North America business this year. Okay. Thanks and all the best sir. Thank you. Thank you. The next question is from the line of Mathias Vermale from BlueBay Asset Management. Please go ahead. Hi, thank you. Hopefully, you guys can hear me right. Hi, Anand. Quick question from me. If you can just Good to talk again. Look, if you can just tell us a little bit for the debt guys, what's your total debt and cash And if I understood correctly, over the quarter, you drew $250,000,000 of the sustainability loan, so that's up to $750,000,000 And with that, you repaid a similar amount of the Arista acquisition. So that's currently around $1,500,000,000 Is that correct? Thank you. That's right, Matthias. And what's your the total debt and cash balance at the end of the quarter, please? What's that is, now I'm going to say in crores, that's 25 INR 1,099 crores and the net debt is INR 2,167,000,000. So the delta is the cash on hand. Perfect. All right. Thanks, Anand. Thank you very much. Thank you, Matthijs. Thanks for joining us. Thank you. The next question is from the line of Suryapatra from Philip Capital. Please go ahead. Thanks for this opportunity. So if you can just talk something about the OpenEdge pipeline that you have created or creating And how is that getting complemented by the NCC effort that you are consolidating everything there? So something on that point, if you can please add? Can you If you can repeat the question, my line broke a little bit. Can you repeat, please? Yes. So I just asked about What is the progress in the OpenEdge pipeline that we are witnessing? And how is that getting complemented by the NPP effort that The launch of the NPP portfolio and consolidating with the opening pipeline. Thank you for the question. You know how I love the OpenEdge purpose and really the OpenEdge purpose It inspired us a lot and made so much energy towards to really be focused and create sustainability And transform the agriculture worldwide. In our purpose, OpenAg that could be marked in the first of February 2019 had created so much energy in the direction of We imagine sustainability and our strategic agenda in that direction Arising the launch of NTP now. And Natural Plant Protection, It's saying that the word needs more sustainability. The word needs our users We move in that direction. And the NTP, our natural paint protection pipeline, You've come very much in that direction. You know our dedication, the soil side, with the soil health, You know how much JEE have advised the ZEBA technology that we have launched some years ago. And this technology is now gaining more and more traction. And the combination of this technology of Zebra Together with our other industry pipelines and the end of this, it's creating so much In terms of the health the soil health side, let's say, we are very much dedicated to the health soil Technology, we are very much dedicated to The first phase of the crops, I would say that the crop are germinating and transforming From the seed to a plant, the soil have a so important part on that. And we are in our NPP technology, We are combining a lot of technology for the soil health perspective for the germination moment of the plant, What we mean, crop establishment and all the work that we are doing To make the plants more strong, more healthy, what we are creating with our Baxi plant That is this product or this solution that works like a vaccine to the plants. It's Steve. We are working with all these different dimensions from The soil side from the crop establishment side, from the side of make the plants more health, more Capable to compete with the disease and combining that with our proactive approach Because the sustainability has come from that perspective, we need to make the plants more strong, more able to compete. But at the same time, it is necessary to use a chemistry, to use intervention, we have that intervention to be done. It's like in our life now as a human being, we try to take vitamins, we try to we take vaccines, We take everything to avoid to take an antibiotic. But if we need antibiotic, we need to have the antibiotic To cure, to control that problem. So we are working with the planes in the same way. We are working to make the trends more resilient, more able to compete Without so much chemistry intervention, but one is needed. We have the chemistry To control that too, say that is the beautiful from Chivas that we apply the buyer solutions, we apply The sustainable solutions and one is needed. We have the chemistry to support that And to have the best productivity, the best yield per hectare in a sustainable way. I believe This purpose, our OpenEdge purpose that came to us, gave to us The sustainable side is really transformed UPL in a company That is really it's connected with what the award means. It's connected what the consumers Our demanding are connected with what our soils our soil is demanding, our farmers are demanding. Our focus in solving our pharma's pain points is very much there. I hope I have answered you, But OpenEdge for us winning so much and so strong for us that I can stay here 3 days talking to you about that. Yes, sure. Just a suggestion, sir, since all of us are like excited about To see the kind of faster progress in the biosolutions portfolio and the OpenEdge portfolio and all that, so It could be great if you can just say quarterly performance of this portfolio. It's not a reason why this seems that global, what is the State contribution that the portfolio is clearly making per quarter so that, that will be helpful in understanding And seeing the progress of the company qualitatively going ahead. So that was One suggestion and last question from my side, sir. On the non agri business, Non equity new businesses, what you have mentioned in the initial part of the discussion Q and A. So what is the size and scale that you are Targeting and also if you can just talk something about the integrated the progress on the integrated manufacturing effort That you are witnessing, considering the current global supply disruption that has been presented. Thanks. Yes, thanks For the question, no, UPL is probably the most backward integrated ad chem company in the world. We are completely backward integrated. A lot of the feedstocks go into alternative industry like pharmaceutical industry. So we've started to exploit that backward integration core competence into developing other Anssuri, it goes from lubrication industry to pharmaceutical industry, etcetera. That portfolio is continuing to grow. I think probably in the next Meeting, we will next annual meeting, we can give more details, but that business is growing. I believe UPL will we are the largest if you look at our chemical manufacturing platform, we are by far the largest The Charity Chemical Company, if you look at it from Chemicals point of view, we are completely integrated so that insulates us from Price fluctuation and we are not really dependent on any particular source of from Any country for our raw materials, we are fairly well hedged from that point of view. It just gives us and our customers the Comfort that they can have a very strong alternative supply chain platform, which is not That industry is growing as we know, especially the industry is growing. UCL is investing a lot In backward integration, so we believe that platform will continue to grow Thank you. The next question is from the line of Dhruvam from HDFC Fund. Please go ahead. Yes. Thank you so much. My question is a bit related to the earlier one is that we have a very strong manufacturing base and given the context that Prices out of China rising, this gives probably a significant advantage. So can you share some thoughts on what probably our share of total technicals Probably the self manufacturer. And also if you probably do internally do some quantitative analysis And you can share some thoughts there. As you say, for example, how the technical prices globally moved and probably how has your cost of production moved And how much is that contributing to your competitive advantage? Because the cost is increasing for all your peers, but probably it is not So if you can give some quantitative data on to understand for us to understand how is this helping us? Hi, Raj. So I'll hand it over to Raj. Yes. Before Raj goes, UPL has been gaining market share for the last 10 years in almost every market. We believe we are competitive and but we It'll have the highest margins in the industry. So you can just understand that our cost of manufacture is much better than anybody else, Because you cannot go into all markets and yet so we generally have advantage in our cost that Shows up in our margins. And the fact that we are gaining market share is that we are able to Exploit the advantage of our cost of manufacturing. So Raj, you can answer that. Yes. Go ahead. So actually Thanks, Jay. So actually I think you are asking a follow on question. Yes. So my point was only that in the context, where the prices are rising globally, this gives a further advantage to us. So I just wanted to better understand on some qualitative data or some In terms of how is that contributing to us? No, it will be difficult for me to tell. So I think you will see that when there is And the market fluctuates a lot and we see a steady growth in UPL Business and growth in volumes and market share. And that sort of gives you the barometers. Quantifying numbers, this is all a moving target. We have a whole portfolio of products. It's not easy to say what happens in synthetic pyrites or happens in other This was an 8 or some other portfolio. It doesn't necessarily match up all the time because this is all a moving target. It's very difficult to say exactly how much advantage, but you can for sure say that we are probably the lowest cost manufacturer in all the products we Operator? Yes. And that's also evident there. I think the point which I was trying to drive was that if you see Our result will be a 6% volume growth, right, and our margins expanded with 2% increase in the prices, right. So Which means we have been able to very much defend our cost with such a large cost increases that happened in the market. We I've been able to deliver 6% volume growth on back of our manufacturing and also have been able to defend the cost, So that we are least impacted, which is evident also from But difficult to say that how much is our technical share, which we buy from other players recurring or in terms of making it. I don't know only say that a substantial part of our business comes from our own management actually. Sure. Thanks so much. Thanks. Thank you. The next question is from the line of Aditya Javal from Investec Capital. Hi, thanks for the opportunity. Most of the questions have been answered. Just one question for Anand. So Anand, our debt increased in this Quarter, I was thinking about 1,000 crore. And this is a typically lower working capital client quarter. In the next couple of quarters where the contribution of Latin America would increase, will the Sure. So in line with the I mean, I would say that you're right, working capital will go up as we keep saying in Q2 end of Q2 and Q3. And then you have a sharp decline in working capital in Q4 as all the collections and other things come by. The debt will go up, but Definitely not in line with the working capital going up. It will be at a lower pace. And you will see a sharp decline in debt by end of the year Yes, as we collect the cash. Our target, as I mentioned earlier in my commentary, that We would be looking at bringing down our net debt levels to below 2 net debt to EBITDA. And that's something which is our commitment To all the rating agencies as well as to our debt investors that we will bring down our net debt to EBITDA to below 2 levels. Okay, okay. Yes, that's it from my side. All the best. Thank you. Thank you. The next question is from the line of Akshay Goel from ICICI Prudential AMC. Please go ahead. Hello, sir. Thank you for the opportunity. I just wanted to understand for guidance for revenue growth, 7% to 10%, How much of it when it comes from the NTC platform? Like if we exclude the NTC platform, how much revenue guidance are you looking for? I think about 8% to 10%, more towards 10% with all these investments which we are doing in NTC platform. We do expect now to be At a slightly higher thing, so higher contribution to the overall revenue. So we would be looking around the 10% levels. Thank you. Thank you. The next question is from the line of S. Ramesh from Nirmal Bank. Please go ahead. Good evening and thank you very much. Welcome back to the European situation. You mentioned that you're trying to recoup the investment of Payless products and sustainable products. What is the transition time? And to what extent will that impact your growth rate in the next few quarters? Can you share some thoughts on that? Let's see if I understood the question. In Europe, what will be the change from chemical to sustainable? And what will be the process of that? Can you repeat the question please again? Yes. So you just want to understand the progress of this transition, do you expect this pressure on Revenue growth to continue, we see the revenue growth being negative for, you say, Yes, yes, yes, yes. No, it's amazing the pain points That the farmers in Europe is having because of this challenge that Very important products have been better and they are having so much different kind of pain points. And this is what we are very concentrated. We are very, very much concentrated to understand their pain points And to be able to found solutions to that pain points In a way that they can keep the youth like I was talking about this pharma in Poland to say that we have many farmers in Poland that is part of our Pro Motiva approach. And when we visit the farmer and the farmer was producing 80 tons of echo per hectare. And we were so happy to see that because With so much constraint and so much pains and this farmer was an example Of quality and example of sustainability approach and with a so high yield. And then we went there to understand what he's doing different. And what they are doing different is that He was doing the last 6 application with our vaccine plan, our sustainable solution. And he was explaining to us and giving to us, let's say, how happy He was with our technology. And we are learning from the farmers their pain points. At the same time, we are learning from them sometimes from how to they have been able to use Our technology is maximum. And this example of vaccine plan in Apple is so interesting that A farmer that is using a sustainable solution, a vaccine to finalize their crop and apply as soon as the fruit It started to become like a pinpoint size. They just treat with our vaccine plan until the end And they have been able to produce 80 tons 80, 80 tons of apple per hectare With that technology. So this example is what we are doing. And so we are really Understanding their pain points, understand how to positioning our product, how to use our product in each phase of the crop And the sustainable solutions is very much like that. We need to positioning the product to use the technology in the right time. And that is the secret of the biosolutions is to use In the right time, like our antisprout, I was talking about our Argos, this technology that we have to It's a sprouting in potato. You need to apply the product in the right moment. The moment that the sprout If it starts to grow, you need to apply the product. See that intervention in the right time Makes a huge difference. This is why we are so much customer centric and we are pushing the company To become more and more customer centric is to become more and more closer to the pharma and able to understand that. This is the way that we are growing Europe, the way that you continue to grow all over the world. But in Europe, Especially, it's even more important. And we are quite happy to see the progress that we are having there. Hello? This is the operator. Yes. Go ahead. Yes. Okay, just sticking to Europe now. What is the impact of the floods in Europe on the cost and cost losses? And how does it impact your Sales in the coming quarters? What will be the impact of our What product loss in the next quarter, this is the question? Yes. What is the impact of the plug in upon the Across in Europe and maybe overall industry case and you see your tone ability to play No. No. No impact. So you're saying in spite of the business as different, spite of the class? Yes, no impact, no impact Because of these other product solutions. Okay, thank you very much, sir. I will join the queue. Thank you. Ladies and gentlemen, we will take one last question from the line of Sonali Sadongar Jefferies India. Please go ahead. So thank you for the opportunity. So most of my questions are answered. Just one question. Could you give us an update on the synergies, both on the revenue and the cost side. Thank you. Hi, Sonali. This is Anand here. I think we had when we announced the Arista transaction, we had announced about the cost of the revenue synergies target. And As you know, the cost synergies were for a period of 2 years. 2 years are done by March 2021. So while we continue to get the benefit Cost synergies, but we stopped tracking it. As we announced during our annual results, cost synergies were upwards of $200,000,000 I think it was around 220 odd 1000000. So we are above the target that was delivered on cost M and A. On the business synergies also, we have exceeded our target. We have set ourselves a target of $350,000,000 and I think we are way above $400,000,000 So We work now as one integrated company and we while we pursue we continue in our journey of cost reduction and bringing more Sales, but we are not tracking separately under the synergy. Understand. So I'm sorry, one last question from my side. So what is the situation of the inventories on a global level? So you talked about the inventories in the U. S, etcetera, but what about the other regions? That's it from my side. Carlos? Yes, yes. The inventories in the broader regions, let's say, South North Europe, in North America is the lowest inventory that we see in the market. And but when you go to Brazil, when you go to Latin America, South Europe, we will see more inventory. In our expectation, that this inventory You'll be reduced quite a lot in the next season now. In the case of Latin America, including Brazil, with the price of the commodities that we are seeing, we believe that this year, The use of inventory will be quite high and the decrease of the level of inventory will be very big Because the price of the commodities. Now in the constraint of some products, we are seeing That fertilizers are with a lot of constraint in terms of the ability because the farmers Demanding a lot. Seeds are in constraint because the demand for soybean seeds, corn seeds Very hard. In Europe, like South Europe, we are seeing Reduction now in the inventory because the rain came in the end of June, beginning of July. And the rain came and the demand of products have been quite high in July. I see our sales in some countries have been increased a lot in July, And the use of the products is there. Now I we don't believe that we will have inventory at the end of the season, Hi, inventory, the end of the season. Even in South Europe that the frost have impacted the beginning, but now the rain came And it's normalizing and we are not seeing an issue. So we see this year much more Constraint in availability of product then in high inventory. I believe it's the opposite this year. I don't know if you have any other questions. This is the operator. So the current participant has left the question queue. And that was the last question. I would now like to hand the conference over to Mr. Anand Vohra for closing comments. Thank you. Once again, thank you everyone for joining us on this call. I think there are some very good questions and We have the full spectrum of questions. So if but if anyone has any follow-up questions, please do not hesitate to reach out to Radhika, Avira All myself and we'll be happy to answer the questions. Thanks once again for joining us on the call and have a good weekend. Thank you. Bye. Thank you. Thank you. Thank you. Ladies and gentlemen, on behalf of UPL Limited, that concludes this