I am pleased to report that FY2016-17 proved to be yet another successful year at UPLfor a number of reasons.
UPL continued to outperform the global crop protection chemical industry by reportingrevenue growth of 17% against the broad sector's degrowth of 2.5%. Thisoutperformance is remarkable considering that the overall sector posted its secondconsecutive de-growth year. The weaker the performance of the overall global sector thestronger was UPL's response.
UPL did not merely grow; EBIDTA and PAT grew 26.5% and 83.8% respectively indicatingqualitative profitable growth which is the hallmark of outperforming companies. At UPLwe believe that this sustained outperformance is the result of a focus on the developmentof innovative farm solutions. We do not just manufacture products; we address marketplacegaps. We do not just launch new products that we think will succeed; we speak extensivelywith farmers the world over who tell us just what kind of products would make the biggestdifference to their viability.
In view of this UPL's competitiveness is principally derived from a sense of humility.Even as we market products in more than 130 countries we believe that we need to knowmore about what is transpiring in farms in real time. We believe the words realtime' are critical; as climates evolve and pests actions mutate there is a growing needto reconcile corporate discipline with organisational flexibility.
At UPL we pick data faster than most companies from across the countries of ourpresence. We pool this information to be able to deduce and dissect. We draw our principallearnings from emerging realities. We integrate the head and tail of our decision-makingto respond with speed. We fuse new product development marketing distribution and brandbuilding to respond to unmet farm needs. And we do all this around a price-valueproposition that attracts new customers on the one hand and enhances our share of thecustomer wallet on the other. The key then to our sustainability is not that we maximiserevenues margins and profits; it is that we empower the farmer to do so in the firstplace. Our solutions are customised around specific terrains pests and crops enhancingfarmer effectiveness. During the last number of years we have helped a number of farmersin South America virtually transform their farm viability towards robust growth; we havehelped a number of European farmers protect their crops more effectively; we have helped anumber of Asian farmers reduce crop shrinkage through timely crop protection chemicalintervention; we have helped a number of farmers in Africa with the right seed qualityenhancing their viability.
We believe that this ability to enhance farmer competitiveness boosted a growingpreference for our products making it possible to enhance market share at a time whenfarmers remained cautious about additional investments in agri-inputs.
Year in review FY2016-17
At UPL we are never satisfied; there is always an obsession to make the good better.
We strengthened our business across a number of fronts during the year under review.
We continued to service key agriculture markets like India Brazil and North Americathrough the development of specialised products in line with emerging farmer needs. Wedeepened our presence in geographies - Asia Africa Turkey and China - where we did notenjoy a pervasive presence.
We launched new products in Latin America which helped moderate farming costs.
We built a pipeline of products that will be launched over three to four years. Weprioritised the manufacture and marketing of branded products. We reinforced our productbasket comprising seeds on the one hand and pre- and post-harvest chemicals on the other.
We offered farmers spraying services; we commissioned a advisory call centre to forgestronger farmer relationships.
We continued to file patents and register products across countries strengthening ourmarketing footprint (filed 253 patents and registered 1862 products in the five yearsending 2016-17).
We improved process efficiencies to emerge as one of the most margins-accretivecompanies within the global generic crop protection chemicals industry.
We through our overseas subsidiary UPL Corporation issued our inaugural USD 500 mn5-year senior unsecured notes rated Investment Grade by Moody's / S&P / Fitch the first USD bond issued by an agrochemical company from Asia.
The case for global food security
At UPL we are engaged in a business that will be increasingly critical for thesurvival of humankind.
Global population is expected to reach 8.4 billion by the mid-2030s and 9.6 billion bythe mid-2050s. A country's ability to feed its people will depend on three major factors:availability of arable land accessible water and increasing population.
FAO indicates that global food production will need to rise 70%; food production in thedeveloping world will need to double. Interestingly FAO also projects that biofuelproduction by 2030 will require 35 million hectares roughly the size of France and Spaincombined which could affect farmland availability.
The spread of prosperity across the world especially in China and India has catalysedthe demand for meat eggs and dairy products. This has laid greater pressure on the needto grow more corn and soybeans to feed cattle pigs and chickens. The double-impact ofpopulation growth and a richer diet will require countries to double crop growth by 2050.The increased 70% food production growth will need to counter rising energy costsdepleting aquifers farmland loss to urbanisation and increased natural calamities. To topall these challenges are pests; insects are responsible for~13% of the global crop lossesestimated at USD 2000 billion per annum.
At UPL we believe that crop protection is possibly the most cost-effective immediateand enduring intervention directed at enhancing farm security. To address the overarchingneed to provide adequate food in a cost-effective way we are addressing the challengewith the seriousness it deserves: through the formulation and delivery of seeds toagrochemicals and ancillary products directed at enhancing soil fertility with nutrientsmoderated water consumption crop protection and value-added services. The result is thatUPL does not market products; it provides farm-enriching solutions.
The UPL advantage
What sets UPL apart in a challenging business is knowledge.
UPL comprises one of the most effective combinations of talented agronomists andengineers; these teams address emerging farm challenges to provide a superior valueproposition around a combination of product superiority and optimised costs. Over theyears we have recruited professionals from local geographies enhancing our globalterrain understanding.
UPL also comprises a deep capability in the manufacture of a number of products wherewe are not only among the largest global producers but also enjoying demonstrated costleadership.
UPL has a diversified product portfolio of unique mixtures combination products andformulations which are sold as branded off-patent products. UPL also emerged from just aproduct provider to a solutions provider. The Company's Adarsh Kisan Centre is an advisorycall centre for farmers in India in major Indian languages and English to provide farmersinformation such as weather conditions mandi prices and technical issues amongothers.
The Company started Adarsh Farm Services providing mechanised field spraying services.The Company's Unimart stores (a chain of farm advisory and solution centres in India andAfrica) provide expert advice quality products and necessary guidance to farmers.
UPL possessed local expertise in terms of registration capabilities across multiplegeographies which helps in access to different markets.
UPL's prudent financial management helps keep a tight control over the working capitalcycle managing foreign currency volatility through sound hedging mechanisms andmitigating credit risk through credit insurance covers.
It is the coming together of these diverse capabilities that makes UPL a well-roundedplayer enhancing the optimism of sustained outperformance and the Compnay emerging as oneof the top five global generic crop protection chemical players across the foreseeablefuture. UPL being the market leader is attractively positioned to reap the benefits fromemerging opportunities that present themselves across the future.