Other income was Rs 7.85 crore compared to Rs 0.34 crore. Interest cost was up 129% to Rs 29.75 crore. Depreciation rose 161% to Rs 35.14 crore. PBT was up 409% to Rs 193.43 crore.

Effective rate of taxes was down 1520 bps to 22.2%. PAT reported was up 533% to Rs 150.41 crore.

Segment wise, Basic Chemicals Segment revenue stood at Rs 236.26 crore, up by 17% YoY and accounted for 23% of sales. PBIT from the same was up by 61% to Rs 58.09 crore and accounted for 25% of total PBIT with PBIT margin at 24.6% as compared to 17.9% for Sep18 quarter. This segment reported strong volume growth of 10% accompanied by higher realisations supported as the company leveraged its cost leadership position to serve the demand for its products. The basic chemical segment continued to deliver strong upsurge in profitability.

Fine and speciality chemicals segment revenue stood at Rs 138.11 crore down by 4% YoY and accounted for 14% of sales. PBIT from the same was up 2% to Rs 37.84 crore and accounted for 16% of total. PBIT margins stood at 27.4% as compared to 25.8% for Sep18 quarter. The company is taking strategic positions on key products in the Fine and speciality chemicals portfolio enabling better margin performance. Steps to steadily enhance volumes in the forthcoming quarters are being implemented.

Performance products segment revenue stood at Rs 211.78 crore up by 119% YoY and accounted for 21% of sales. PBIT from the same was Rs 116.79 crore compared to Rs 14.18 crore in Sep 18 quarter and accounted for 49% of total. PBIT margins stood at 55.1% as compared to 14.6% for Sep18 quarter.

Phenolics segment revenue stood at Rs 434.23 crore compared to Rs 28.37 core in Sep18 quarter and accounted for 43% of sales. PBIT from the same was Rs 24.21 crore compared to loss of Rs 4.74 crore and accounted for 10% of total. PBIT margins stood at 5.6% for Sep19 quarter.

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

"I am glad to share another strong quarter of performance culminating in a robust first half. We have delivered over 30% revenue growth in the backdrop of heightened volatility in the macro-economic environment. More importantly, our profitability has multiplied during this period as we have acted swiftly to capitalise on the opportunities that have emerged across the industry due to global events.

Our Basic Chemicals and Performance Products segments have performed strongly as we capitalised on industry headwinds. In the Fine & Speciality Chemicals segment, we have taken strategic positions on key products which have enabled us to improve margins with stable volumes. We are implementing steps to elevate the performance of this segment in the ensuing quarters.

Deepak Phenolics is on the cusp of completing its first year since commissioning of the plant and we are proud to have contributed to nation building by successfully substituting imports. We are pleased to have stabilised a global scale plant in record time as we rapidly achieved optimal utilisation while managing large quantities of inputs and production in an efficient manner. DPL provides us with an exciting new growth platform and we are confident that the incoming pipeline of downstream products will further aid our performance.

We aim to strengthen our business proposition by adding incremental capacities, widening our customer base and enhancing the share of complex, high margin products. This will serve to widen the market opportunity and open up new frontiers of growth for us."

Revenues stood at Rs. 572 crore in Q2FY20 compared to Rs. 433 crore in Q2 FY19, up by 32% Y-o-Y. Topline performance was driven by strong growth in both Basic Chemicals and Performance Products segment, which have benefited from robust demand growth. These segments witnessed an all-round performance across key products and markets. The Fine & Speciality Chemicals segment witnessed a stable performance as the company continued to take strategic position on select products enabling higher margins amidst temporary volume moderation.

Domestic revenues for the quarter stood at Rs. 335 crore as compared to Rs. 275 crore in the same period last year, representing a growth of 22% Y-o-Y. Amidst slowing economic growth, DNL delivered volume growth across established products combined with better realizations. Revenues from exports were Rs. 231 crore in Q2 FY20 compared to Rs. 152 crore in Q2 FY19, resulting in robust growth of 52% Y-o-Y. Strategic initiatives undertaken to incrementally enhance volumes, widen the customer base and enrich the product mix have enabled DNL to capitalise on the opportunities emerging across the global industry landscape to ensure a better export performance.

EBITDA grew sharply to Rs. 216 crore, higher by 213% against Rs. 69 crore reported in the same period last year. EBITDA margins have expanded to 37.7% compared to 15.9% in the same period of last year. Due to the reset of global supply chains, there have been demand-supply mismatches in certain products. DNL has benefited by rationalising production towards those products enjoying high realisations enabling it to deliver robust profitability.

PBT was Rs. 191 crore in Q2 FY20 increasing by 334% over Rs. 44 crore in the same period last year. PAT grew by 536% to Rs. 179 crore in Q2 FY20 compared to Rs. 28 crore in Q2 FY19.

Performance for the half year ended September 2019

For half year ended September 2019, net sales rose 122% to Rs 2054.31 crore. The company operating margins increased 1190 bps to 24.5%. As a result operating profits rose 331% to Rs 504.29 crore.

Other income was Rs 19.44 crore compared to Rs 1.16 crore. Interest cost was up 145% to Rs 60.71 crore. Depreciation rose 159% to Rs 68.36 crore. PBT was up 489% to Rs 394.66 crore.

Effective tax rate was down 800 bps to 28.5%. PAT reported was up 563% to Rs 282.02 crore.

For the 6 months, sales from the Basic chemical segment rose 9% to Rs 462 crore and accounted for 22% of sales. PBIT from the same was up by 38% to Rs 94.5 crore and accounted for 19% of total with PBIT margin at 20.5%.

Sales from the fine sand speciality chemicals segment fell 5% to Rs 254.03 crore and accounted for 12% of sales. PBIT from the same was flat at Rs 65.77 crore and accounted for 13% of total with PBIT margin at 25.9%.

Sales from the performance products segment rose 147% to Rs 437.48 crore and accounted for 21% of sales. PBIT from the same was Rs 247.93 crore and accounted for 50% of total with PBIT margin at 56.7%.

Sales from the phenolics segment was Rs 934.85 crore compared to Rs 71.26 core in Sep18 and accounted for 45% of sales. PBIT from the same was Rs 83.21 crore and accounted for 17% of total with PBIT margin at 8.9%.

Update on Deepak Phenolics Ltd.

Deepak Phenolics Ltd. (DPL), a wholly-owned subsidiary of Deepak Nitrite, operates a Global Scale Plant to manufacture Phenol & Acetone, with a capacity of 200,000 MTPA and 120,000 MTPA respectively. This is supported by capacity to manufacture 260,000 MT of Cumene for captive consumption.

DPL recorded a turnover of Rs. 443 crore in the quarter under review, with EBITDA of Rs. 43 crore. Slowing economic growth globally and the subdued activity levels in the automotive and real estate sector in India are presenting a challenging backdrop for demand of end use products and resultant prices. As a result, crack spreads are prevailing at the lower end of the range.

Due to a planned shutdown of the plant for 14 days during the quarter, there was a decline in Revenue and EBITDA on a sequential basis. The plant continues to achieve new milestones as, adjusting for the shutdown, it achieved capacity utilisation in excess of 100%. It also achieved highest ever level of production in a single day in Sept 2019.

Keeping in mind the depressed domestic market conditions, the company is making significant efforts to support exports in order to utilise the plant in a more efficient way. Meanwhile, the downstream projects for Acetone is progressing well and production is expected to commence by the end of this financial year.

Outlook by the company

Deepak Nitrite is very well positioned to further strengthen its leadership position in the Indian Chemicals industry through focus on expanding its expertise across multiple chemistries as well as leveraging its relationships with domestic as well as global clientele.

All the three Strategic Business Units (SBU) are expected to deliver sustained growth over near term led by planned capacity expansions and product rationalisations and extensions. While BC and PP segment will continue with its growth momentum, FSC segment is expected to deliver an improved performance on the back of new product launches and capacity augmentation.

Phenol and Acetone are expected to continue the growth momentum. Development of downstream products for Acetone is moving in the right direction and the same is expected to be commissioned towards the end of this financial year. All these will result in more sustained and profitable growth for the Company which aims to further strengthen its cost leadership position in the market, to drive business momentum on the back of positive demand scenario. 

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