Deepak Nitrite consolidated net sales fell 36% to Rs 674.49 crore in Q1FY21 compared to Q1FY20. Domestic Revenues stood at Rs. 157 crore in Q1FY21 as against Rs. 320 crore in the corresponding period last year. This was partly because the company was constrained in its production, and partly because the company chose to take advantage of a depreciated currency and increase export bias. Export revenues were Rs. 186 crore in Q1FY21 compared to Rs. 227 crore in Q1FY20, reporting de-growth of 18% Y-o-Y. The focus was higher on exporting to countries that were on the path to recovery from the effects of the virus: Asia and Europe.

The company operating margins increased 270 bps to 26.9% leading to 28% decrease in operating profits to Rs 181.63 crore. Other income was Rs 6.75 crore compared to Rs 11.59 crore. Interest cost was down 20% to Rs 24.73 crore. Depreciation fell 7% to Rs 31.01 crore. PBT was down 34% to Rs 132.64 crore. Effective rate of taxes was down 920 bps to 25.4%. PAT reported was down 25% to Rs 98.95 crore.

Segment wise, Basic Chemicals Segment revenue stood at Rs 152.89 crore, down by 32% YoY and accounted for 23% of sales running for slightly under 2 months of operations. The fuel additives segment that depends on transport has witnessed a demand shock and volume recovery may be protracted. The other products however continue to witness consistent demand. PBIT from the same was flat at Rs 36.56 crore and accounted for 21% of total PBIT with PBIT margin at 23.9% as compared to 16.1% for June19 quarter.

Fine and speciality chemicals segment revenue stood at Rs 139.77 crore up by 21% YoY and accounted for 21% of sales. Customer demand for the largely agrochemical and personal care segments continues to be robust, and cost excellence initiatives have borne fruit. PBIT from the same was up 123% to Rs 62.33 crore and accounted for 36% of total. PBIT margins stood at 44.6% as compared to 24.1% for June19 quarter. The company expects FSC to continue to be a growth engine in forthcoming quarters

Performance products segment revenue stood at Rs 53.96 crore down by 76% YoY and accounted for 8% of sales. While the detergent end segment has retained its volume requirements, both paper and textiles demand have been substantially affected by the pandemic. This has had a domino effect on optical brighteners' volumes and DASDA, which was in short supply last year, has transitioned into oversupply. It expects the situation to normalise as the paper industry is expected to show cautious recovery over the next couple of quarters. PBIT from the same was Rs 6.5 crore compared to Rs 131.14 crore in June19 quarter and accounted for 4% of total PBIT. PBIT margins stood at 12% as compared to 58.1% for June19 quarter.

Phenolics segment revenue stood at Rs 330.68 crore compared to Rs 500.62 core in June19 quarter and accounted for 49% of sales. PBIT from the same was Rs 68.62 crore compared to Rs 59 crore and accounted for 39% of total PBIT. PBIT margins stood at 20.8% for June20 quarter compared to 11.8% in June19 quarter.

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

"Entering the financial year, we knew that this quarter would need a substantial pivot from financial performance to caretaking. Your company's highest duty is to the 2500 families that depend on it for their livelihood and the countless that live and work around it for their safety.

We were faced with multiple challenges including petrochemical volatility, COVID-19 lockdowns, manpower constraints, Cyclone Nisarg over the quarter. In spite of that, I'm happy to note that, we continue to adhere to the 3Ps of growth.

People: The company carried every employee with it- increasing salaries and wages across all locations, widening medical coverage, distributing medicines, regular medical tests and created safe work environment while preparing for ‘worst case' scenario.

Planet: The EHS team was cognizant that a restrictive manufacturing environment can lead to catastrophic oversights and remained vigilant in ensuring asset and material safety.

Profit: The company sustained overall margins while retaining customer stickiness.

I am also proud of DPL's technical team that self-commissioned the IPA plant in April without support from the foreign technology provider to support the nation in its time of need. The plant is already operating at 110% capacity and will soon be expanded. DNL's brownfield expansions will be commissioned in the 3rd and 4th quarters, and development activity for a range of value added products is taking shape at the newly acquired Dahej site."

Standalone performance

On a Standalone basis, owing to nationwide lockdown caused by Covid19 pandemic, effective capacity utilisation in the quarter was around 65%, i.e. loss of a month's operations, hence revenues for the quarter de-grew by 36%, at Rs. 355 crore in Q1FY21 when compared to Rs. 554 crore in Q1 FY20.

Standalone EBITDA was at Rs. 102 crore, lower by 46% as against Rs. 188 crore in the corresponding period last year. Underutilization of capacities due to lockdown largely affected earnings. Within the segments, the PP segment witnessed lower EBITDA margin as one of the chemical intermediates – DASDA, which enjoyed an extraordinary run up in prices during last year witnessed demand drop in end-use segments i.e. paper and textiles owing to CoVID-19.

Standalone PBT stood at Rs. 85 crore in Q1FY21, contracting by 48% over Rs. 164 crore in the same period last year. Standalone PAT for the period under review stood at Rs. 64 crore as against Rs. 107 crore in Q1FY20, de-growth of 41% on a Y-o-Y basis.

Performance for the year ended Mar20

For year ended Mar20, net sales rose 57% to Rs 4229.71 crore. The company operating margins increased 900 bps to 24.3%. As a result operating profits rose 148% to Rs 1025.8 crore.

Other income was Rs 35.2 crore compared to Rs 15.12 crore. Interest cost was up 38% to Rs 114.87 crore. Depreciation rose 80% to Rs 139.73 crore. PBT was up 201% to Rs 806.4 crore.

Effective tax rate was down 1100 bps to 24.2%. PAT reported was up 252% to Rs 611.03 crore.

For the 12 months, sales from the Basic chemical segment rose 5% to Rs 940.32 crore and accounted for 22% of sales. PBIT from the same was up by 44% to Rs 209.35 crore and accounted for 21% of total with PBIT margin at 22.3%.

Sales from the fine and speciality chemicals segment rose 9% to Rs 585.26 crore and accounted for 14% of sales. PBIT from the same was up 38% Rs 175.24 crore and accounted for 18% of total with PBIT margin at 29.9%.

Sales from the performance products segment rose 90% to Rs 767.12 crore and accounted for 18% of sales. PBIT from the same was Rs 418.62 crore and accounted for 42% of total PBIT with PBIT margin at 54.6%.

Sales from the phenolics segment was Rs 2000.86 crore compared to Rs 908.01 core in Mar19 and accounted for 47% of sales. PBIT from the same was Rs 187.31 crore and accounted for 19% of total with PBIT margin at 9.4%.

Performance of Deepak Phenolics

While prices and demand for Phenol in the domestic market were affected by lockdown, migration and low discretionary spend on housing, DPL changed track to increase export volumes. Demand for its pharmaceutical grade IPA and Acetone however was strong owing to which net income showed growth despite lower production due to an effective shutdown of 40 days. The IPA plant which was commissioned in April was already ramped up to 110% capacity utilization within the quarter while maintaining all safety standards. The plant and commercial teams managed extraordinary feats given the challenge that production of Phenol and Acetone requires movement of thousands of tonne of raw materials and finished goods across multiple state boundaries which each have their own restriction policies.

Deepak Phenolics, a wholly owned subsidiary of Deepak Nitrite, is expanding its capacity of production of lsopropyl Alcohot ('lPA') at its manufacturing facitity situated at Dahej, Gujarat from 30,000 tonne per annum (tpa) to 60,000 tpa. IPA is a Solvent and majorty used by Pharma companies and is also used in manufacture of sanitizer.

Outlook by the company

While major segments such as agrochemical, pharmaceutical and personal care continue to show robust demand, segments such as paper, laminates and fuel additives may take until the end of the year to show recovery. Doubling of the IPA plant to further reduce the country's dependence on imports has been taken up on a fast track basis. The year will also see brownfield expansions of several DNL products as well as completion of the large CoGen Power Plant which will further improve cash and performance reliability.

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