Moody’s lowers UPL Corp ratings to stable from positive
   Date :26-Nov-2019
Business Bureau :
Moody’s on Monday lowered agrochemical company UPL Corporation ratings to stable from positive following weaker than expected operating performance of the group. “The change in outlook to stable from positive reflects the weaker than expected operating performance of the broader UPL Group, and our expectation that it will take longer for its credit metrics to improve to a level appropriate for a higher rating,” Moody's vice president Kaustubh Chaubal said in a statement here. At the same time, Moody's has affirmed the company's Baa3 long-term issuer rating and the Baa3 rating on the company's senior unsecured notes maturing in 2021, it said. Given today's change in outlook to stable from positive, an upgrade is unlikely over the next 12-18 months, it added.
The stable outlook also incorporates the expectation that the company will not undertake any large or transformational acquisitions, at least until Arysta LifeScience is completely integrated and the company's financial profile has been restored to pre-acquisition levels, it said. In January 2019, UPL Corp completed the acquisition of Arysta LifeScience for USD 4.2 billion, funded with a mix of debt (USD 3 billion) and equity (USD 1.2 billion).
Arysta’s asset-light and lean operations with a strong presence in Africa, Russia and Eastern Europe complement UPL Group’s leading position in India, the Americas and Western Europe, as well as its vertically integrated manufacturing capabilities, it said. In addition, Arysta's product offering, with a strong presence in herbicides, bio solutions, seed treatment and other products complements UPL Group's products and has helped increase its market share across these verticals. Moody’s ratings for UPL Corp also considers the following environmental, social and governance (ESG) factors.
UPL Group faces a moderate level of environmental risk, primarily stemming from the risk of air, soil and water emissions, as well as from the clean-up of hazardous waste. In addition, the company's earnings are susceptible to adverse weather conditions. Climatic conditions such as drought or excessive rainfall can have a significant impact on demand for crop protection products, although the company's geographic diversification somewhat mitigates this risk.