The year 2015-16 was one of the most challenging that the industry has seen in years. A number of countries experienced erratic weather that impacted farm output, commodity realisations declined, farmers held back sowing in regions following enhanced water-stress, geopolitical challenges affected sales and currency devaluation dented earnings. Each of these factors would have been potent enough to erode earnings; that these transpired concurrently affected revenues of crop protection chemical companies worldwide. It is in this context that the performance of UPL Limited must be appraised. The company reported 11% revenue growth, 19.8% EBIDTA growth and 13.5% net profit growth on a consolidated basis.
We planned better. We delved deeper. We worked harder. In short, we did things better.
The stark outperformance by the Company during the last financial year was the result of an extensive multi-year de-risking program.
We continuously strengthened our manufacturing processes, optimising costs, reducing waste, rationalising energy consumption and minimising environmental hazards.
We created a robust portfolio across the entire lifecycle : from seeds to pre-harvest solutions to crop protection chemicals to post-harvest solutions.
We created a product basket targeting multiple crops, fruits and vegetables, insulating ourselves from an excessive dependence on any one segment.
We introduced products with applications across multiple crops, maximising returns.
We widened our presence across 124 countries to protect from a fundamental risk of being present in a few countries.
We diversified from being only an agri-inputs supplier to providing farmer advice and value-added services through active engagement (through initiatives like Kisan Call Centre and Adarsh Farm Service).
We created a retail store network to provide one-stop farmer solutions.
We invested in research (more than 136 patents), establishing our recall as an innovation-driven company.
We strengthened our supply chain to replenish dealer shelves with speed and eliminate stock outs.
The result of all these initiatives was that we reported profitable growth during the year under review.
India is equipped not merely to address its food security challenge but to emerge as a global provider.
India is the world’s second largest agricultural nation. The country enjoys an agricultural tradition that extends across the centuries. And yet, the country reports agricultural efficiencies lower than the global average.
What India’s farmers need is training in modern farm practices and the use of contemporary products to enhance yield on the one hand while moderating crop loss on the other. One of the interventions critically needed is an exposure to prudent crop protection chemical use; India has 16% of world’s population and less than 2% of land mass. The National Center for Agricultural Economics and Policy Research has targeted to boost food grain production by 1.3% annually to 280 million tonnes by 2020. With limited available arable land of ~190 million hectares, the pressure is on increasing yield per hectare.
There is a growing threat of global food insecurity. By 2030, food demand is projected to increase 50% and 70% by 2050. Global population is expected to grow from 7 billion to 9 billion by 2050. Food output needs to double to feed additional mouths even as farm acreage is shrinking owing to urbanisation and environmental degradation.
The challenge is not only about growing 70% more food in 35 years; it lies in making 70% more food available for consumption. Around 30% crops produced worldwide – about 1.3 billion tonnes - are lost or wasted each year, including the resources expended (water and labour primarily) to grow them.
The prudent use of crop protection chemicals addresses this reality through integrated pest management, enhanced farmer incomes, revitalisation of rural economies, reinvestment in farming and creating a growth foundation for the world to address the challenge of putting adequate food on the table a decade or so down the road.
In view of this, I see crop protection chemicals as a critical piece in the overall solution to making the world a better place.
Over the years, UPL has evolved its role from one focused on product sale to one focused on enhancing farmer prosperity. We have been playing a missionary role in educating farmers, creating cost-effective products around their specific needs, responding to changes in climatic and cropping patterns, while evolving from a product supplier into a comprehensive crop-solutions company.
Shortly after the Company acquired the Mancozeb plant from the innovator company in Colombia, it doubled production capacity, strengthened regulatory compliance and rationalised production costs from USD 3.5 per kilo to USD 2 per kilo within a few months. We developed a coating product to increase the shelf-life of vegetables and fruits by 20%. Our innovative fogging product Oorja helped reduce untimely potato sprouting. There were dozens of such initiatives directed at enhancing farmer practices, income and well-being.
I must end with optimism. Your company continues to do things better and in doing so, intends to enhance value for all its stakeholders in a sustainable way.
R. D. Shroff, Chairman