Deepak Nitrite held a conference call on 12 May 2023 to discuss the results for the quarter and year ended Mar23 and way forward. Mr. Maulik Mehta, Executive Director and Chief Executive Officer, Mr. Sanjay Upadhyay – Director, Finance & Group CFO and Mr. Somsekhar Nanda –CFO of the company addressed the call.

Highlights of the Concall

• During FY23, the operating environment was characterized by sharp volatility as outbreak of the Russia-Ukraine war and resultant disruption in global supply chains caused spike in several commodities and led to high inflationary pressures on inputs. Further, the fire at the NDS plant resulted in lost production and sales for about 40 days. Additionally, discontinuation of supply arrangements for certain inputs had to be made good by imports and alternate supply which led to additional cost. This disadvantage is being addressed through backward integration projects and the outcome will be seen once these projects are implemented.

• Advanced Intermediates segment revenue increased by 21% in FY23 due to sustained healthy demand from key customers, while EBITDA was lower by 8% due to a combination of internal and external factors such as the Russia-Ukraine war, high input costs, disrupted global demand and supply and fire at the Nandesari Plant which caused non-availability for 40 days. Additionally, alternate supply arrangements for certain inputs resulted in higher cost.

• Phenolics segment experienced a 15% revenue growth in FY23 due to strong volume growth. However, the EBITDA margin decreased due to input price volatility

• The company reported strong double-digit growth in top-line, attributed to stable demand from customers and high plant efficiency, operating all plants at high utilization rates.

• The Phenol plant has clocked utilization of more than 120% for the quarter, and, achieved highest-ever quarterly domestic sale and highest production per day of phenol. In Jan 2023, DPL crossed the milestone of 1 million tonnes of phenol production on a cumulative basis since inception

• Phenolics achieved high utilisation rates of more than 120% in Phenol Plant, 125% in Cumene Plant and 104% in IPA in FY23

• EBITDA was impacted by high input prices which are yet to be fully passed on to customers. Further, the inflationary pressures in inputs costs have contributed to overall higher costs. Realisations of some products, which were exceptionally high in the base period last year have now normalized, also contributing to the normalized margin during the current period

• On a consolidated basis, domestic sales to export ratio has moved from 83:17 in Q2FY23 to 79:21 in Q3FY23 to 77:23 in Q4FY23.

• The company submitted insurance claim for fire at Nandesari Plant. The company has received an interim payments of Rs 11 crore upto March 2023 and a further Rs 14 crore in April 2023 aggregating to Rs 25 crore

• The comany effectively managed forex volatility risk in Q4FY23 using dynamic hedging, resulting in a gain of Rs 2.28 crore, with a cumulative gain of Rs 6.91 crore. Total treasury income for FY23 was Rs 34.37 crore.

• For FY23, prepayment of term loan was Rs 161 crore leading to savings in interest costs. In Q4FY23, DPL prepaid term loan of Rs 61 crore, taking its net debt equity ratio to 0.03x as compared to last year 0.20x

• The company recorded the highest production from hydrogenation of 4,407 tonne at Dahej plant

• The company reported highest export sales of inorganic intermediates of 7,603 tonne, out of which US export sales were 4,184 tonne

• The comany has cumulatively invested of Rs 405 crore in DCTL (Deepak Chem Tech LImited) upto March 2023. Out of Rs 405 crore received, close to Rs 378 crore has already been deployed towards growth projects

• BTC/BTF plant in DCTL is expected to be commissioned in Q3FY24, while acid plant is expected to be commissioned in Q4FY24. Both these plants will significantly add to the profitability once commissioned and fully ramped up. This will also cater to internal captive consumption needs

• Both MIBK and MIBC plants in DCTL are planned to be commissioned in Q1FY25. These are derivative products of acetone, and the objective is to captively use acetone to manufacture MIBK and MIBC thereby going into more downstream value-added products.

• As Phenol capacity utilisation has peaked, while demand still remains robust, the company is undertaking debottlenecking of Phenol facility which will help increase the production by about 10% which is expected to come on stream by Q1FY24

• The company has planned capex of Rs 2500 crore over various projects in FY24 and FY25

• The company is aiming to double its revenues and Ebitda in next 4-5 years from FY23