Deepak Nitrite held a conference call on 09 November 2023 to discuss the results for the quarter ended September 23 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

• Revenues decreased 9% in Q2FY24 to Rs 1788.05 crore compared to Q2FY23 due to lower realizations

• Ebitda during the quarter has been impacted by input cost and a migration to relatively non-native markets for some of its products which earlier had a home in geography such as the Euro Zone

• Domestic business generated revenues of Rs 1437 crores while exports were at Rs 341 crore during the quarter

• The global chemical industry continued to witness considerable challenges in Q2FY24. The industry has witness demand slowdown in certain countries and segments. There has been inventory destocking by Chinese suppliers, driven by the optimization and normalization of supply chains post the tumultuous covid years. The increase in the cost of capital due to the steadily rising interest rates over last 18 months, has also contributed to the trend of lower demand.

• The company is observing a normalizing trend QoQ with regards to volumes particularly in products geared towards specific end user segment like glass, paper, homecare, etc.

• The company anticipates a normalized performance starting from Q4 while key export markets are grappling to demand pressures due to the global situation. However, domestic consumption and demand remain large intact

• The company remains debt-free, with a net worth of Rs 4342 crore.

• The company has cumulatively invested Rs 599.50 crore in DCTL (wholly owned subsidiary), out of which Rs 100 crore was invested in Q2FY24.

• The company invested approx. Rs 17 crore in equity of Deepak Oman Industries. It holds 32% stake as part financing equity to set up SNI/ SNA project at Oman.

• Construction work of PhotoHalogenation and fluorination has made significant progress while operations and commissioning teams are actively engaged for system handover, and plant commissioning is expected by December 2023

• Most of the engineering work is complete for acid Unit and on-site construction is making rapid progress

• Other expansion projects including MIBK, MIBC, Hydrogenation among others are taking shape and will be commissioned as per plan

• Polycarbonate compounding project is taking concrete shape and is under implementation as per plan.

• The company expects all its Brownfield expansion to complete in next 6 months

• The company witnessed steady performance amid challenging operating environment. This was driven by robust gains in Phenolics division and steady demand recovery.

• Key export markets continue to grapple with transient destocking, while domestic consumption remains firm. DNL continues to emphasize on products and geographies that enjoy stable-to-positive demand.

• End-user sectors including glass, paper and homecare among others have witnessed green shoot of demand revival. The company is anticipating a well spread normalized recovery from Q4 onwards.

• Healthy QoQ growth in EBITDA was attributed to strong volume gains in Phenol due to favorable demand and high capacity utilistion. This was further supported operational efficiencies while preserving the spreads.

• The company has successfully commissioned de-bottlenecking through Advance Process Control (APC).

• Advanced Intermediates EBITDA margin maintained at 19% despite challenging operating environment. The company witnessed moderated performance due to continued subdued demand from key end-use sectors like Agrochemicals, Dyes & Pigments and Textiles. The company observed a positive uptick in its sales volume compared to the previous quarter

• Phenolics EBITDA margin improved to 17%, from 10% in Q1FY24. The company reported profitable growth due to sharp increase in volumes of phenol, acetone and IPA, along with higher capacity utilization of 136% in the first half of FY24. Spreads were stable-to-higher owing to operating leverage benefits. There is a gradual Improvement in demand in the phenlics segments.