For the half year ended Sep 18, net sales adjusting the Rs 22.5 crore of profit on insurance claim, stood at Rs 853.73 crore up by 28% YoY. Also the OP for 6 months ended Sep 17 includes Rs 18 crore of profit net of expense towards the profit on insurance claim has been excluded. Thus after considering the said effect, OPM came in at 14.2%, up by around 170 bps. Thus, OP growth stood at Rs 121.20 crore up by 46% YoY. Other income was lower by 76% to Rs 1.13 crore. Interest costs was higher by 12% to Rs 22.58 crore and depreciation was higher by 1% at Rs 25.81 crore. PBT was thus higher by 75% to Rs. 73.94 crore. After considering the EO income of insurance claim money of Rs 3.48 crore in H1 ended Sep 18 and Rs 18.33 crore, in H1 ended Sep 17, PBT after EO stood at Rs 77.42 crore. Total tax was higher by 56% to Rs 27.57 crore on YoY. Finally, PAT came in at Rs. 49.85 crore up by 16% YoY.

Commenting on the performance, Mr. Deepak C. Mehta, Chairman & Managing Director, said,

"Deepak Nitrite has delivered a strong all-round performance during the quarter under review led by healthy demand in the domestic market. Amidst the backdrop of a challenging business environment characterised by rising trade tensions as well as volatile prices of crude price and related petrochemicals, we have delivered double digit growth of 22% in Revenues and 24% in Profit After Tax. As the global supply chain reorients itself toward India, both Basic and Fine & Speciality Chemicals demonstrated healthy growth in demand for key products. The Performance Products segment continues its turnaround journey and we remain optimistic about further growth.

The greenfield project to manufacture phenol and acetone under Deepak Phenolics will commence commercial production shortly and this will be a significant milestone in Deepak Nitrite's growth trajectory. It will also serve as a springboard for downstream products which are by themselves import substitutes. A growing domestic demand deserves a stable domestic supply."

Other updates

All of the Strategic Business Units (SBUs) contributed to the growth indicating robust business traction. The Basic Chemicals continued to build on positive momentum in demand for key products. This was complemented by strong growth in the Fine & Speciality Chemicals segment. The Performance Products segment elevated its performance improving upon the momentum from recent quarters.

Despite significant increase in input costs due to rising crude oil prices and those of related petrochemical intermediates, the Company has expanded its margins. This is due to various cost management initiatives undertaken as well as better realisations for some of the key products which enjoy greater demand.

Domestic revenues stood at Rs. 275.02 crore in Q2 FY19 from Rs. 208.8 crore in the same period last year, growing by a healthy pace of 32% Y-o-Y. Better operating environment led by supply disruptions in China helped the Company to further strengthen its market position for some of the key products in the portfolio.

Revenues from exports came in at Rs. 151.9 crore in Q2 FY19 compared to Rs. 141.6 crore in Q2 FY18, higher by 7%. Positive demand traction for some products in the global markets resulted in stable gains in export revenues. Benefit from rupee depreciation also contributed to the momentum.

Revenues from the Basic Chemicals (BC) segment stood at Rs. 201.7 crore in Q2 FY19 compared to Rs. 170.0 crore in Q2 FY18, growing by 19% Y-o-Y. Post capacity augmentation, the Company has delivered higher volumes of high margin products which resulted in strong realisation gains during the quarter.

Revenues from Fine Speciality Chemicals (FSC) segment were Rs. 143.8 crore in Q2 FY19, higher by 27% compared to Rs. 112.9 crore in Q2 FY18. Encouraging traction for some of the key products in the FSC segment due to a positive demand scenario helped to drive the growth.

The Performance Product (PP) segment reported revenues of Rs. 96.8 crore in Q2 FY19 compared to Rs. 84.2 crore in Q2 FY18, a growth of 15% Y-o-Y. Focussed initiatives to widen the customer base and address new geographies coupled with improved product mix and higher operating efficiencies have yielded desired results and this is expected to grow going forward.

Update on Phenol and Acetone Project

DNL is implementing a mega project, aligned with Make in India, to manufacture 200,000 MTPA of Phenol and 120,000 MTPA of the co-product Acetone. This will be supported by capacity to manufacture 260,000 MT of Cumene, which is a feedstock for manufacturing Phenol and Acetone.

This project is being implemented in a 100% subsidiary, i.e. Deepak Phenolics Limited (DPL). The proposed Phenol Plant will be located at Dahej in the State of Gujarat, with a capital expenditure of Rs. 1,400 crore being funded by debt and equity in the ratio 60: 40.

DPL will address the opportunity in the domestic market which is currently met by imports. In addition, its plant is being based on cutting-edge technology and will be resource and energy efficient. Local availability of Phenol and Acetone is expected to boost the production of derivatives and downstream intermediates, which will expand the overall market in the country.

Progress:

Trial runs for phenol and acetone have delivered successful and encouraging results and the product meets global standards and specifications. Customer acceptance has been received and future orders secured. The company expects to achieve regular production status in the very near future.

Outlook

Financial Year 2019 will be a milestone year for the Company as Deepak Phenolics commissions its Greenfield Project of Phenol and Acetone which will result in import savings of USD$ 400 Mn for the country. This will help drive Deepak's goal of becoming the fastest growing Indian chemical intermediate manufacturer. Existing Strategic Business Units (SBUs) are also expected to deliver solid performance, owing to positive demand landscape in the domestic and global markets driven by supply disruption in China and strengthening of Company's product portfolio. Brownfield expansions in BC and FSC to enhance capacities of major products will further aid the growth momentum.