UPL Limited (UPL.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to UPL Limited Q2 and H1 Fiscal Year 2021 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Radhika Arora from UPL Limited. Thank you, and over to you, ma'am.

Thank you, operator. Good morning, and good evening, ladies and gentlemen. Thanks for joining us today for the results for the quarter and half year ended September 30, 2020. On this call, we will be referring to our presentation that has been shared with you and is also available on our website, and we take it as having read the safe harbor statement. From our management team, we have with us Global CEO, Jai Shroff; Group CFO, Rajendra Darak; COO, Diego Casanello; and Global CFO, Anand Vora; and other members of the global leadership team. We're also pleased to have with us today, Mr. Dyer who is the current President with agri retail and sits on the Board of UPL Corporation as an Independent Director. He chairs the audit committee for UPL Corp. We will start this presentation with a business update from Diego, followed by a financial update from Anand. With that, let me hand over to Diego for the business update. Over to you, Diego.

Thanks, Radhika. Good afternoon, everyone. Today, I'm pleased to present positive financial results for the second quarter. The last time we spoke, we were still in the early stages of what is an unprecedented global health crisis that continues to affect millions of people around the world. Despite the challenges, our teams have adapted quickly to our new environments to ensure we continue to support farmers in keeping food production uninterrupted. Our hearts and thoughts continue to be with the victims of this terrible pandemic. I am pleased to share that in Q2, we achieved revenue growth of 14% and EBITDA growth of 17%. These results were supported by market share gains in several territories, favorable agronomic conditions and an improved supply chain from Q1 that was impacted by COVID. The positive developments were partially offset by significant currency volatility in markets like Brazil, LatAm and Africa. We continue to optimize cash flow and reduce net working capital by 14 days primarily driven by inventory reductions and an extension of accounts payable. As a result of the positive business development, we saw earnings per share improving to INR 6.07 per share compared to INR 2.17 in prior year. As we look at the highlights of the quarter, our ability to gain business momentum despite COVID-19 and the impact of currency weaknesses in key markets demonstrate once again, UPL's excellent competitive position and the successful acquisition and integration of Arysta LifeScience. Volume growth was achieved, thanks to revenue synergies from the cross-selling of legacy UPL and legacy Arysta portfolios, the continuous growth of leading brands like our Herbicide Lifeline, our insecticide Sperto and our miticides [indiscernible] as well as more favorable weather patterns in Brazil, U.S., Chile, in parts of Central Europe. Although most regions have shown important gross margin improvement, negative currency effects in Brazil impacted our gross margin in the quarter. We continue to increase prices and reduce cost of goods sold. We are confident in our ability to close the gap in the second half. Furthermore, our focus remains on expanding our cost leadership in post-packing product lines, while at the same time, making sure that we invest in growing our business with higher value differentiated and sustainable solutions. As we do that, we will continue to drive mix improvement. In the deck, you will find a slide showing the regional performance. We are pleased to announce that all regions have contributed to growth this quarter versus prior year. In LatAm, we saw strong growth in Chile, Argentina and Colombia compared to prior year. Additionally, there was revenue growth in Brazil despite the continued Brazilian real devaluation and supported by pricing improvements over prior quarter. Positive weather conditions in the North America and Midwest and better prices for grain commodities led to higher revenues in North America. Dry conditions in Western U.S. increased the demand for miticides. We also saw strong growth in our portfolio with differentiated and sustainable solutions, leading to market share gains in several accounts. We achieved higher sales in Europe despite the second wave of COVID-19. Strong growth in Northern Europe is attributed to herbicides, while Southern Europe experienced growth in Italy and Turkey, driven by fungicides and biosolutions. In the rest of the world, our growth can be credited to the strengthening of our go-to-market in China, including our focus on higher-value brands. China is a key market for UPL, and we continue to invest in people and R&D to support our presence in that market. Additional new product launches in Vietnam and other Southeast Asian countries are resulting in growth in those countries as well. At the same time, normalization of weather patterns contributed to a strong performance in South Africa and Australia. Finally, India continues to see robust growth in key products including preemergent herbicides and biosolutions. Despite the COVID-19 lockdown, India continued to deliver record collections, which helped our net working capital performance. I want to take this opportunity to say thank you to all our employees for their efforts this quarter and to thank farmers and partners for trusting us with their business. We will move forward in the second half of the year with a sharp focus towards delivering on our commitments and continuing to strengthen UPL's position as a global leader. Thank you very much. I will now turn the call over to you, Anand, to provide more details about Q2 and H1 financial results.

Thank you. Thank you, Diego. Thank you very much. Let me start with the key financial highlights, and then I shall go into the details of the financial numbers. We had an encouraging quarter 2 with good agronomic conditions and supportive crop prices, as Diego mentioned earlier. We recovered the lost ground in Q2 with revenue growth of 14% and EBITDA growth of 17%, which is reflected in the H1 performance with H1 growth of revenue of 7% and 10% growth in EBITDA on a pro forma basis. The revenues and EBITDA for the quarter were very strong, even though the environment was challenging with currency volatility in some key regions. We are encouraged by our performance this quarter and Q3 and Q4, which are typically strong quarters for UPL with peak season for LatAm, U.S. and Europe, will help us deliver our stated guidance. Moving on to Slide 8. It is there in the presentation, the Q2 profit and loss account. Let me take you to some of the key financial numbers in the profit and loss statement. We are comparing the financial results for Q2 financial year 2021 versus the same period in the previous year on a reported basis. I just want to clarify here, when I say a reported basis, it is without the impact of the purchase price allocation which we had to do last year in the same quarter because it had some impact because of the acquisition of the other stuff. These are numbers of Q2 compared with the reported numbers of Q2. Revenue was higher by 14% at INR 8,939 crores. This was mainly driven by 19% higher volume primarily offset by FX impact of currency devaluation in Latin America. Regional increases in revenues were 12% at LatAm, 9% at North America, 6% at Europe and 18% in India and the rest of the world, leading at 27% increase. Gross margin were higher by 9%. Gross margin as a percentage of revenue was 40% this quarter against 42% in Q2 last year, a decrease of 210 basis points. The margins were lower due to price pressure in certain regions due to historically low China export prices and negative impact of currency devaluation in Latin America. This has been partially offset by reduction in cost of goods sold, cost synergy and partial increase in prices in local currencies in some of these LatAm countries. We continued to optimize the fixed cost, and they were flat as compared to that of Q2 of the previous financial year. EBITDA was higher by 17%, which was driven by higher gross profits. Exceptional items for this quarter at INR 211 crores versus INR 305 crores of the same quarter last year. The exceptional item was mainly on account of USD 36 million, which is approximately INR 195 crores, provisioning for the closure of Rotterdam plant for optimization of our global manufacturing facility. This includes certain portion of roughly about $17 million of cash items. The balance is all noncash expenses. The production volume for this plant will be made by India and Colombia plant -- will be made up by India and Colombia plant. This initiative is in line with what we had communicated at the time of acquisition, leading to the cost synergy. Net profit for the quarter was INR 464 crores versus INR 166 crores last year, resulting in an EPS of INR 6.07 per share. Moving on to the next slide, which talks about the cost and revenue synergies. Cost synergies in Q2 stood at USD 33 million or in INR terms, about INR 245 crores. And the cumulative cost synergies from last year and first half of this year are at USD 153 million against a target of delivering of USD 200-plus million by end of this financial year 2021. Revenue synergies for Q2 stood at USD 52 million, in INR terms, about INR 390 crores, and cumulative revenue synergies, USD 300 million as of September 30, 2020, against the target of delivering USD 350 million revenue synergies by FY 2022. We remain committed to delivering the targeted cost and revenue synergies. Moving on to next slide, which are the H1 performance. The revenues were higher by 7%, and the EBITDA was higher by 10% year-on-year against the pro forma numbers. When I say the pro forma numbers, they are after adjusting for the [indiscernible] allocation adjustments in the previous year for the same first half. On a reported basis, our EBITDA grew by 23% as compared to that of the same quarter -- same half year of the previous year. Gross margins were 109 basis points lower. Recovery in revenues were driven by partial increase in prices in local currency. Net profit was at INR 1,014 crores versus INR 452 crores last year. Moving on to working capital. We continue to optimize the working capital and saw a reduction of 14 days for that of the previous year. Inventory for the quarter were lower at 105 days, receivables were flat at 124 days and payables at 123 days. Payables were higher by 10 days, in line with the guidance of the increasing payable days, as we have said at the beginning of the year. Therefore, the net working capital stood at 106 days as compared to 120 days in the previous year. Moving on to the next slide, which is on the cash flow. Cash flow from operations in H1 stood at INR 136 crores. Cash flow from operating activities were at INR 3,545 crores. The increase in working capital was in line with the seasonality of the business at INR 2,915 crores in H1, which, as you know, builds up in Q2 and Q3, and then we have a release in working capital in Q4. Investing activities included a CapEx of INR 948 crores and acquisition, of which one of the major ones was [indiscernible] in Chile. Gross debt as on September 30 was at USD 4.3 billion, USD 500 million higher compared to March 2020, mainly on account of the bond issuance in June 2020. As we have shared with you, we had done this bond issuance, and the basic purpose for this issuance was to buy back the bonds, which are maturing in October 2021, of -- which were again of $500 million. We could buy back -- we got under the tender of $81 million of bonds. Rest of the money has been retained by us as insurance capital during this pandemic period. The net debt is at INR 23,841 crores as against INR 22,060 crores as of March 31. This is due to increase in working capital. We paid INR 866 crores of long-term borrowings in H1 in terms of net debt as on September 30, the net debt stood at $3.2 billion. Despite the pandemic, the economy and the business are now getting back to normalcy. After experiencing 2 quarters in the year, we are now more confident, aggressively work towards reduction of gross debt in H2. We remain committed to achieving the 2x net debt-to-EBITDA by end of FY 2021, that's the end of this year, as committed to the rating agencies and maintaining our investment-grade credit rating. As for the outlook, we summarize, we believe that the strong volume driven by good weather conditions, new launches and focus on differentiated products, price increases in local currency, cost savings and synergies and further optimization of fixed costs would help us to deliver growth in revenue and EBITDA, and we maintain our guidance as we had shared during the last quarter. Before I end the presentation, and we move on to the Q&A, I would like to briefly discuss a recent event of the auditor resignation at UPL Corp., of the Mauritius subsidiary of UPL Limited. I would like to mention that BSR and Company LLC, which is a sublicensee of KPMG in India continues to be our statutory auditors for UPL limited and for the consolidated financial statements of the group. KPMG Mauritius has resigned as the statutory auditor for UPL Corporation only and have been replaced by [indiscernible] ETA Mauritius. As previously communicated, this was done at the request of the company for reorganizing the audit processes and bringing in efficiency in terms of timely completion of audit and announcing the financial results. We have the Mr. Shyam Periwal, who also joined us on today's call. He is the audit committee chairman for UPL Corp. So in case if anyone wants to have any specific questions, we'll be very pleased to answer some of these questions pertaining to the resignation of the auditors. With this, I would hand over back to Diego for a quick update on our sustainability highlights. Thank you. Over to you, Diego.

Yes. Thanks, Anand. In the deck that you can download from the web, you will find a slide that shows our sustainability performance. Sustainability is not a sidenote for us, it's really at the core of our strategy, it's at the core of our OpenAg purpose, and it's really what motivates all our employees or the leadership to come to work every day. We are continuing to see our sustainability performance improve each year in the rankings of trusted industry organizations, like FTSE Russell, Dow Jones Sustainability Index and most recently also Sustainalytics. In September of this year, Sustainalytics, an industry leader in ESG Ratings and Research, ranked UPL #1 among 53 agrochemical companies and the ones that are under assessment, which are most of them based on an in-depth analysis of environmental, social and governance factors. Our score of 26.2 reflects the lowest ESG risk amongst our peer group. This reflects a 38% improvement from our prior assessment. Additionally, we are conducting community initiatives across 10 countries and more than 70 communities and were recently awarded the best Community Program award at the 12th Global CSR Awards and the Good Governance awards. One of our initiatives that have been announced recently is our collaboration with FICA Foundation where 2 organizations have joined forces to promote and raise awareness about sustainability development in agriculture and children education. We will continue to focus on becoming a more sustainable organization and achieve our mission to make every single food product more sustainable. We will also clearly communicate our commitments and results over the course of the next quarter earnings calls. Thank you very much. I'm handing over back to you, Anand.

Thanks. Thanks, Diego. Thank you very much. With this, we have the senior management team, Mr. Shroff, Diego, myself, Mr. Rajendra Darak and Mr.[indiscernible] and we'll be happy to take questions. Over to you, operator. Thank you.

[Operator Instructions] The first question is from the line of Tarang Agarwal from Old Bridge Capital Private Limited.

Congratulations on great set of numbers. 2 questions from my side. One, if I look at your fixed overheads, whether I see Q2 FY '21 over Q2 FY '20 or H1 FY '21 over H1 FY '20, they're flat in the ballpark of INR 3,400 crores to INR 3,500 crores for the half year. So what is riding in these expenses to be so flat? And how should we see them moving forward? That's one. And the second is any additional nonrecurring exceptional items that you foresee going forward in H2?

Yes. Thanks, Tarang, for joining us on this call. I think I would say Q1 and H1 being flat, we made conscious efforts to keep the expenses within a certain ballpark, I would say, increase when we do our budgeting. But this year, we have been able to keep it. And we also -- since this year budget was prepared, this was the second year of post integration, so we did build in the integration cost savings also. The synergies are also as a part of our budgeting expenses, and we made a conscious effort to keep it down. For this year, also, we were aided by some of -- most of the world went into a lockdown and there were significant reductions in travel costs and other costs, even some of the selling and promotion expenses largely were managed through virtual meetings and other things. So that helped us to keep them flat. Typically, in dollar terms, we make sure that we manage the -- we don't allow into beyond 2.5% to 3% of -- in expenses at a global level. So that's our target which we fixed. So one could estimate those. Now this would vary from country to country, depending upon the local currency and inflation rates there. But on an overall basis, in dollar terms, we make sure that we try to work within 2.5% to 3% increase year-on-year and no more. So that's broadly on the expenses.

Sure. And on the nonrecurring exceptional cost items?

I think we have guided that we would be having close to about $70 million to $100 million of exceptional items, which is largely related to the integration. Most of it is over, but one could see another about $15 million to $20 million more for the next year -- next, I would say, next -- in H2. The main ones are basically towards personnel, which, as I said, a fair amount is over. There are some which will be coming through. And the big one, which was on one of the plant closures, which we have fully provided for in this quarter. So I don't expect more than another -- in H2 more than another $30 million if I put the additional -- and this also is on the very conservative side.

The next question is from the line of Varshit Shah from Emkay Global.

Sir, my question is firstly on the Latin America. So we have taken price hike to offset the impact of ForEx. How much of that you have achieved till date? And how much more we can see in Q3 coming in, which would aid our gross margin expansion? That's my first question. And my second question is on the China strategy. So you have already -- any update on how the progress is happening on the China side, especially in the B2C and developing brands in China?

Diego?

Yes. Thanks for the question. With respect to Brazil, I have to say that despite the strong devaluation of the Brazilian real, we were able to increase revenues in Brazil. And that's what -- because, obviously, we are increasing prices in local currencies. We feel well about our ability to, call it, normalize U.S. dollar margins when it comes to FX impact for -- over the second half. So that's going to help our margins in the second half. And most of the region actually was showing better margins already today than last year, which is a very encouraging sign of, call it, the pricing power of the combined business now of legacy Arysta and legacy UPL. With respect to China, China is a fantastic growth opportunity for us. It's a big market. And we have now a very important portfolio after the acquisition of Yoloo Laotin. We have invested in people on the ground. Recently, more than 15 people to distribute across different territories. We are also moving more towards the B2C model where we are creating demand and helping our distribution partners pull, let's say, the business in the key crops. We have been -- traditionally, the legacy Arysta was having emphasis more on the specialty crop market and on the seed treatment market. And with legacy UPL, we had a fair position in the rock crop market and some additional products on the specialty crop market. So now we have a complete, let's say, a very vast coverage of the Chinese market. But we are just at the beginning, we believe that we have a great opportunity in China to make China, in the future, one of the biggest countries for UPL.

Sure. And just 1 last bookkeeping, can you repeat net debt figure once again?

Sorry. Sorry, can you repeat the question?

Question would be the net debt number once again?

Yes, yes, net debt. I'll give you those numbers. Sure. Yes. The net debt is INR 23,841 crores as of 30th of September.

The next question is from the line of Ritesh Gupta from AMBIT Capital.

Congrats on good set of numbers. Just 2 questions from my side. One is the plant that you're closing, what does it mean? Is it the Rotterdam plant, did you say? I mean, did I hear it correctly? And then on the second with -- Hello? -- then on the gross margin side, we are still seeing -- I mean, last year, the margin was reasonably weak. And this time, you have seen -- this time also, the gross margin hasn't been that great. Is it -- should we assume that this is like there is a 100 bps of margin improvement on a one-off basis. But I would understand that last year, the margins are impacted due [indiscernible], et cetera. So this time, only 100 bps of margin expansion on a 1x basis, are you -- is this a normalized level? Or should we expect an improvement at some time [indiscernible].

Yes. I mean, on the Rotterdam plant, the technology that we were using in that plant we are producing in other 2 plants. So this is nearly optimization opportunity to consolidate and be more cost-efficient on that product. I mean that product is actually growing nicely. But we have the sufficient capacity to do that. And on the margin, I see margin expansion opportunities. I think the impact that we have seen was due to the devaluation of currency in Brazil, Mexico, Colombia, some countries in Africa, we have seen significant devaluation with the COVID crisis. But historically, if you look at margins in this industry after events like that, you see that there is a lag, but then there is a phase of recovery, and we are seeing also the trends in that direction. So we're confident towards our ability to [indiscernible] to the next quarters. You always have to look at the quarter also from a quarter-to-quarter perspective because this is a seasonal business and the portfolio mix changes. But when you compare last year's quarter to this year's quarter, our expectation is to see an improvement in the coming few quarters.

Got it. Got it.

Just to add further on what Diego mentioned. I think last year, when you're comparing, we did mention to you that last year, both Europe and U.S. regions had weather-related issues. This year, the agronomic conditions are very good, and we expect Europe and U.S. to also bounce back. And as you are aware, these are profitable markets. So one should expect -- I don't think this is the new normal. One should expect a good margin improvement, as Diego mentioned, over the next 2 quarters also.

Because I'm what I'm surprised with is that Y-o-y, I think, 200 bps decline [indiscernible] at your presentation, which is adjusted. So despite that, there is a 200 bps of margin decline on a Y-o-Y basis, like if you have seen a decent revenue growth and [indiscernible] that you would attribute it to, to the extent that it has also eaten up some of the product mix improvement or -- I mean, I think [indiscernible] pricing pressure.

So it's largely to exchange rates, Ritesh, you're right. I mean, we saw a sharp decline in some of the LatAm countries exchange rates. And -- but you can't increase the price by 30%, 35%, when you have a sudden drop in the exchange rate. So it was largely because of that.

Got it. And as you can just highlight the amount of [indiscernible] pending on the books and I think [indiscernible] why the coming continues to do [indiscernible]

I think it was because of the pandemic, and I think we have already initiated the process. As I mentioned in opening statements, we have reduced our debt at a gross level by about INR 700 crores, INR 800 crores. And we will continue to do that aggressively in quarters. We have mentioned we have -- I mean, I think, world has learned to live with this new pandemic. Businesses are returning back to normalcy. Banks are more than happy to lend money. So we are working on a plan to take down our cost as we [ move forward. ]

The next question is from the line of Ayan from Invesco.

I just wanted to ask the [indiscernible] the Audit Chairman of UPL Corp. Maybe just to share some of the experiences that UPL Corp. has had in completing the financial statements on time and just some insight into the decision-making process to move the orders back to [indiscernible] and also your confidence in the resources that [indiscernible] has to provide to UPL.

Stefan?

Yes, sure. It's Steve Dyer here. And yes, in terms -- I'll talk about the change in the auditors first. So just, again, a little bit of a background that, for sure, that's already been communicated here is about -- about a year ago that that change was made to KPMG originally and I was doing the audits before them. And that was really done from a consolidation standpoint. As mentioned, KPMG is doing the audit that they the limited and consolidated level. So from an efficiency standpoint, I thought it makes sense for KPMG to do the Mauritius audit to make that change at that time. And then after going for a few quarters, it was clear that KPMG was struggling to complete the audits on a timely fashion. There was no concern around the quality of the information being provided, but it was creating both stress in KPMG and within UPL. So after discussions with KPMG, it was really a mutual decision to -- for them to step down from that audit, and move back to [indiscernible]. So as mentioned [indiscernible] was doing that audit previously. And so again, no concerns from that standpoint. We actually had our first audit this last quarter. We had both KPMG and [indiscernible] at the table, the audit committee. And that transition back to [indiscernible] went very smoothly. So from that standpoint, no concerns from going forward with [indiscernible]. And then the audit committee will continue to have access to both CRO and KPMG as on an as well. Just overall, the comment I would make is, having worked at [indiscernible] that was a very acquisitive company. One of the challenges is bringing -- doing a large merger, which the UPL has been going through over the last year. And having gone through many of those myself at the corporate level, I've been very impressed with the ability for the UPL to bring the 2 organizations together, drive the efficiencies as well as implement the systems within the the 2 organizations and bring that together. So I think that's been a very strong point of UPL to bring 2 organizations together to drive those efficiencies, get their SAP corporate accounting system in place across the [indiscernible] which brings a lot of good controls in place with that and consistency across the organization. So again, change is made. Again, no concerns going forward from my standpoint as audit committee chair of UPL.

The next question is from the line of Rahul Vora (sic) [ Veera ] from Abakkus AMC.

I just wanted to understand, if you could throw some light on the supply chain going ahead since the Rotterdam plant [ is short ] [indiscernible].

Sorry to interrupt, Rahul, we're not able to hear you properly.

Hello?

Yes, sir, your voice is breaking up.

Okay. Can you hear me now?

Yes, yes go ahead. Go ahead.

Anand, sir, I just wanted to -- wanted some highlights on supply chains going ahead. After our Rotterdam plant shut down, what are we planning from [indiscernible] polices earlier there? How are you planning for the supply chain going ahead? And logistically, would it still make sense to supply from India?

[indiscernible]

Yes, go ahead, Diego, please. Go ahead.

Yes. So I mean we will be -- sorry, Jai, do you want to say something?

Sorry, you want to go ahead, go ahead, please. Yes. Yes. So as UPL is -- we've gone through a large expansion of our facility in Colombia. And we are looking at rationalizing our manufacturing as integrated new UPL. And this is just part of that. Obviously, we will not -- we'll make sure we don't lose any market share anywhere, and we continue to be focused on our manufacturing cost. We believe that we have an excellent manufacturing impact [indiscernible] necessary cost and rationalize all the facilities to really integrate the whole business property. So this is an ongoing thing which we were working on for a while. Diego, go ahead.

Yes. No, I think that summarizes, Jai. We're always looking at how can we cement our cost leadership, right, and be efficient in our supply chains, and this is one of those steps.

Sure. Fair point. So just additional caution in the same context, I wanted to know if these [ molecules ] which you are producing in this facility, will they be produced in-house? Or will we it be outsourcing to some other company in India itself?

We will be -- sorry, Jai, go ahead.

These are in-house facilities. This will be rationalized into an in-house facility.

The next question is from the line of Abhijit Akella from IIFL.

First question is for Diego, actually. There are news reports about a possible of in Europe, that the regulator, they have [indiscernible] back so would appreciate your perspective on what the time line for this might be. And how deals UPL is with regard to Mancozeb in Europe?

So we are awaiting an official position from the European Commission. We've been working on this since many, many years now. We are prepared for any eventualities. And for, obviously, if Mancozeb remains in Europe, it's great. If not, we have plans to replace Mancozeb with other products. But overall, we believe that we have very strong arguments for defending the molecule in Europe and other parts of the world. But Europe has a very particular approach towards the approval of core protection products. And we know that sometimes it doesn't follow the same scientific approach that maybe some other regions follow. So we are conscious of that. And we are discussing with the authorities and waiting for opinion on the final position or a final communication with regard to Mancozeb. So we'll keep you updated, obviously, as soon as there is an official communication.

Great. And my second question is with regard to the recent increase in crop prices that we've seen across the globe. Particularly in the last 3 months, we've seen sharp increases in prices of corn, soybeans, wheat and maybe several other products as well plus there is talk about [indiscernible] on core production and droughts in biggest parts of the world. So I would appreciate your perspective on how it might impact UPL's business in the short term because of all these droughts and disruptions as well as maybe over [indiscernible], let's say, into next year if these products sustain at these levels?

Yes. So obviously, we are the global company, and always we are facing here and there some drought events. The business is very well fragmented and very well diversified, so that we are able to sustain cash flow performance despite this. I mean if you think about last year, for example, it was an extreme year with respect to the events that we saw. But we are very, very largely diversified. And we have technologies that somehow, when you have a dry period like we saw, for example, in the west of the U.S. this year, our insecticide business tends to be seems to be stronger, while our herbicide business tends to reduce, but there is a certain offset, let's say, also from a technology standpoint. Overall, obviously, we like rain. Just to make it very clear, we like rain, but we feel like our business is robust. We're also working on technologies to help farmers produce the use of water for irrigation, for example, so -- and also sustain dry periods in a more stronger robust rate. For example, our biostimulant product line is growing significantly, is helping farmers go through stress periods, crops stress periods better. So we obviously like to have good agronomic conditions, but overall, our business is robust. And this is nothing new in a way, right? I mean we have seen these cycles all over in the past too.

Yes. Just to add to [indiscernible] on the UPL, with the price increase, we expect that whole and our biosolutions yield enhancement products really see uptick in the next -- not only in the next half but even with future prices also with both. And the farmers are saying their crops improved in '22 season already. So we are seeing a positive outlook even going forward to '22, at least in some of the markets where farmers are advanced. So excited about our portfolio to be able to balance [indiscernible].

The next question is from the line [indiscernible] from Crédit Suisse Asset Management.

Just 2 questions for me. One is the -- for India, I think [indiscernible] the agricultural deal that [indiscernible]...

Sorry. Mr. Chang, your voice is not clear.