UPL Allays Investors’ Fear Over European Drought, Soybean Business

UPL Ltd. said it wasn’t severely affected by the dry weather conditions in Europe as it tried to allay investor fears after a brokerage said that the drought in Europe had affected fungicide sales in the continent.

UPL’s cereals fungicide portfolio is very small which meant it was not as severely impacted as Bayer, the company said in an exchange clarification. “UPL’s strength lies in copper and sulphur fungicides, that are more prevalent in southern Europe, which had good rainfall.”

The revenue from Europe has grown 7 percent during the first half of 2018-19, UPL said, adding that a jump in Asian rust occurrence bodes very positively for the company.

Brokerage firm CIMB highlighted that drought like conditions in Europe, one of the key markets for the Indian agrochemical company, may impact fungicide and insecticide sales in the region. Shares of UPL fell more than 3 percent on Dec. 19 following the report by CIMB. The stock, however, gained 0.63 percent on Dec.20.

Europe generates close to 13 percent of the overall revenues for UPL as of March 2018. Post the acquisition of Arysta—which it announced earlier this year—the company had said that its dependence on Europe could nearly double to 24 percent.

UPL said CIMB’s comments were made in context of Bayer’s Q3 (quarter-ended September) earnings call and hence were related to the season that had already elapsed.

The agrochemicals maker said that it has witnessed a threefold jump in Asian rust occurrence on soybean crop in Brazil this year. This, according to the company, bodes well for its Mancozeb-based fungicides.

UPL’s focus in Brazil is the Asian rust pesticide, which has the highest market size (estimated at $1,817 million), said Motilal Oswal.

The company said that increased consumptions of Intacta seeds—used to protect crops against chewing insects—would not result into any pressure as its range of insecticides are used to protect crops against sucking insects. UPL’s insecticides, it said, are complimentary to Intacta seeds which will only lead to an increase in its demand.