We met UPLL’s management to cognize the narrative around the company’s strategy to emerge as a better player with an improved product basket.
We met UPLL’s management to cognize the narrative around the company’s strategy to emerge as a better player with an improved product basket. We also attempted to understand how the key LatAm and Europe markets (together account for 47% of global agrochemical markets) are shaping up in terms of opportunities.
UPLL is well poised to benefit from the attractive prospects in LatAm. Even more encouragingly, we expect a surprising performance in Europe, which should emerge as a major growth driver over the medium term, especially post Arysta LifeScience amalgamation. Among the major crops in the aforementioned geographies, soybean (predominant in LatAm) and wheat (predominant in Europe) have the highest opportunity size of $8.2 b and $8.7 b, respectively. We note that both UPLL and Arysta complement each other well in terms of their crop portfolio and geographical presence.
In Brazil, UPLL primarily engages in soybean and maize (together account for 63% of the country’s total plantation area) and Arysta in sugarcane and cotton.
Moreover, UPLL has a strong presence in fungicides, while Arysta has a robust platform of bio solutions (#2 globally in bio stimulants) and seed treatment in Brazil. The combined entity, thus, would become the fifth-largest agrochemicals player in Brazil, with 10% market share (v/s UPLL’s current market share of 4.5%).
Brazilian farmers are enjoying strong demand for soybean, primarily due to the tense ties between the US and China. According to industry sources, China accounts for more than 60% of the soybean traded worldwide. With China imposing 25% import duty on soybean from the US, the former’s soybean processors are pumping record volumes of Brazilian cargoes for shipment (12-14m tonne for Oct-Nov 2018 v/s 9 m tonne in Oct-Dec 2017).
UPLL’s focus in Brazil is to counter the Asian Rust pest, which has the highest market size (estimated at $1,817m) among all pests. The company’s newest product Tridium is a step up to the value chain of mancozeb and acts on several points of the fungi, making the resistance difficult.