Capitaline

Analyst Meet / AGM 16-Feb-21

Conference Call

Deepak Nitrite

Consistent capacity utilization of 115% in Deepak Phenolics

Deepak Nitrite held a conference call on 16 February 2021 to discuss the results for the quarter ended Dec'20 and way forward. Mr. Maulik Mehta, Executive Director and Chief Executive Officer and Mr. Somsekhar Nanda – Deputy CFO of the company addressed the call.
Highlights of the Concall

The lingering effects of the pandemic still persist in some of the end use segments like paper, textiles and oil.

Q3FY21 10% growth in revenues has been led by the segments of Phenolics and fine and speciality chemicals, while basic chemicals was affected by temporary raw material unavailability and is seeing a steady progression towards pre COVID levels of demand.

Domestic Revenues were Rs. 864 crore in Q3 FY21 higher by 31% compared to Rs. 659 crore in the immediately preceding quarter. In addition to tailwinds from the revival in economic activity in the domestic landscape, growth has resulted from initiatives undertaken by the company to enhance wallet share with key customer accounts.

Export Revenues were Rs. 368 crore in Q3 FY21 compared to Rs. 326 crore in Q2 FY21, higher by 12.9% q-o-q. Even as concerns of a second wave and mutation of virus are prevalent in select international locations, the company has focused on markets that are recovering faster and witnessing normalization in movement of material and international trade. This has helped to drive the recovery in international revenues.

The basic chemical segment reported revenues of Rs. 196 crore in Q3 FY21 compared to Rs. 172 crore in Q2 FY21, higher by 14% QoQ despite short term challenges. This was in line with strong recovery in the economic activity across the country, backed by planned initiatives undertaken by the company

The fine and speciality chemical segment delivered a consistent performance with revenues Rs. 211 crore in Q3 FY21 compared to Rs. 210 crore in Q2 FY21. Performance is also supported by stable realizations of key products with positive demand landscape across the portfolio.

The performance product segment reported an increase of 34% on a QoQ basis in revenues to Rs. 90 crore in Q3 FY21 compared to Rs. 67 crore in Q2 FY21. Performance product segment is clearly impacted by a sharp drop in prices, which were unusually elevated last year. Although product prices and performance product segment has not yet normalized on a general basis, the company witnessed demand and plant capacity utilization returning to pre COVID levels. The company hopes to see the same trajectory moving into Q4

Deepak Phenolics witnessed revenues increase by 37% QoQ to Rs. 747 crore in Q3 FY21 and Ebitda by a similar number 36%.EBITDA margin stayed firm at 25.5% as the pressure from rising input prices was offset by operating leverage gains. The company initiatives to elevate plant performance have resulted in utilization of over 115% consistently. Forward integration into value added derivatives like IPA, have resulted in improved contribution in both Q2 and Q3

The company has commenced land development operations at its newly procured site in the Dahej which is 127 acres. The site will house the capacity augmentation of the standalone business and will see development in phases.

The Brownfield expansion of the IPA business is also on track and will be commissioned towards the end of Q4FY21 or early Q1FY22.

The company early initiatives to de risk its supply chain from China have resulted in mitigating most of the impact of supply chain challenges faced in the Indian industry.

Standalone Ebitda margins decreased to 30.4% in Q3FY21 from 31.1% in Q2FY21 due to limited availability of certain raw materials despite long term contracts in place, which resulted in stoppage of plant and spot purchases at high cost for a temporary period.

The company is expecting a capex of about Rs 400 crore in FY22 in Deepak Nitrite and about Rs 300 crore in Deepak Phenolics

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