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For quarter ended Sep'15, net sales de-grew by 7% to Rs 337.98 crore. Though there has been 4% growth in volumes, the revenues de-growth was largely on account of correction in global crude oil prices and related petroleum intermediates. The OPM came in at 12.1%, an increase of 140 bps compared to 10.7% in Q2FY15. In addition to improved contribution from select products, higher utilizations at Dahej OBA plant and reduction in realization of crude-linked products, EBITDA margins have improved as a result of import duty in USA which will give an enduring advantage to company's product offerings. Thus, OP was up by 5% to Rs 40.82 crore. Other income was up by 3% to Rs 0.30 crore. Interest costs was up by 5% to Rs 10.58 crore and depreciation was up by 9% to Rs 9.80 crore. PBT was higher by 3.3% to Rs. 20.74 crore in Q2FY16 compared to Rs. 20.08 crore in Q2FY15. PAT came in at Rs. 14.78 crore in Q2FY16 compared to Rs. 15.81 crore in Q2FY15. This was on account of higher provision for tax due to reduced benefit of investment allowance and marginal increase in tax rate.
The bulk and chemicals segment de grew by 14% to Rs 181.39 crore and PBIT stood at Rs 20.50 crore down by 6% YoY with PBIT margin at 11.3%. Fine & Specialty chemicals grew by 14% to Rs 85.63 crore, with PBIT at Rs 21.88 crore, up by 97% YoY and PBIT margin stood at 25.6%. Fluorescent Whitening Agent (FWA) reported a 10% decrease in net sales to Rs 72.20 crore while the loss at PBIT level for the segment stood at Rs 1.69 crore as compared to profit of Rs 6.17 crore for Sept'14 quarter.
Commenting on the results, Mr. Deepak C. Mehta, Vice Chairman & Managing Director, said,
"We are happy to report a strong operational performance in the first-half of fiscal year 2016. With the business spread across three SBUs, the Company continues to report strong performance as each of the SBUs improved its performance. In the BCC segment, volumes were up for all major products even as DNL successfully launched a special grade of Sodium Nitrite for the export markets.
The FSC segment has witnessed strong growth through higher volumes as well as improved realisations. In the Fine & Speciality Chemcials (FSC) segment, in order to secure its position in the world markets, DNL has bagged a sizeable annual contract for two agro intermediates from a leading global agrochem major. Simultaneously, the Company is also enhancing its offerings in pharma intermediates to further diversify its FSC portfolio. The Company was also able to secure long term contracts for personal care intermediates.
The OBA product portfolio has registered strong y-on-y growth and the steady uptick in volumes and utilisation is enabling progressive improvement in performance. The Company has successfully established distribution network and dilution facility in the USA. Based on this, the Company is capable of delivering services to US customers at par with the local suppliers in the USA. All of these have resulted into strong growth and penetration into the USA market.
We are confident of sustaining the momentum in performance given the strong traction in major business segments as well as initiative to drive further improvements in product-mix towards value-added products. A healthy demand outlook across markets combined with an expanding product portfolio would further strengthen our overall performance."
Performance for the 6 months ended Sep'15
For the 6 months ended Sep'15, net sales de grew by 2% to Rs 676.30 crore. Volume growth has been healthy at 10% y-on-y on an overall basis. After adjusting for the impact of lower crude oil prices, the growth in revenues is similar to volume growth. OPM was up by 210 bps to 11.7%, thus leading to a 20% increase in OP to Rs 78.80 crore. Margin growth was driven by a healthy contribution from the FSC segment which registered healthy volume growth with improved realisations. Other income was down by 69% to Rs 0.50 crore. Interest costs and depreciation were up by 20% and 10% respectively to Rs 20.60 crore and Rs 19.29 crore. Thus, PBT stood at Rs 39.41 crore, up by 21% YoY. After providing total tax of Rs 11.28 crore, up by 60%, PAT for 6 months ended Sep'15 stood at Rs 28.13 crore, up by 10% YoY.
Domestic revenues stood Rs. 389.73 crore in H1FY16 from Rs. 413.38 crore in H1FY15. Domestic revenues from the BCC segment were steady due to robust volume growth on a y-o-y basis which mitigated the impact of the decline in crude oil prices and related petrochemical intermediaries. This was also partially compensated by a sharp upside of 43% in domestic FSC revenues.
Revenues from exports stood at Rs. 281.10 crore, higher by 6% in H1FY16 compared to Rs. 266.42 crore in H1FY15. Export growth in the FSC segment came in at 23% due to higher quantities being shipped to the international customers. The OBA product portfolio also reported strong export growth. The Domestic to Export mix has shifted to 58:42 in Q2FY16 from 61:39 in Q2FY15.
Bulk chemicals (BCC) revenues came in at Rs. 363.28 crore in H1FY16 compared to Rs. 411.54 crore in H1FY15, a moderation of 11.7%. Revenue growth in BCC segment was helped by volume growth which offset the impact of lower realisations due to sharp fall in raw material prices linked to crude oil. Select products in BCC segments also reported steady volume growth while healthy demand for OBA products in India and internationally resulted in increased utilisation at the plant.
Revenues from FSC segment stands at Rs. 180.88 crore in H1FY16, an improvement of 25.2% over Rs. 144.51 crore in H1FY15. This came about due to higher volumes and better realisations of key products in the FSC segment.
FWA segment reported revenues of Rs. 134.34 crore in H1FY16 compared to Rs. 139.48 crore in H1FY15. FWA segment reported volume growth of 7% in H1FY16 on account of increasing customer acceptance for our products from the paper and detergent industries. The FWA segment has reported volume growth of 7% from H1FY15 to H1FY16 led by strong ramp-up of OBA volumes by 25% on a y-o-y basis. The FWA segment has also seen an improved performance at the EBITDA level given ramp up in volumes as well as withdrawal of import duty in North American market. This will improve realisations for the OBA products on a sustainable basis thereby providing a competitive edge vis-à-vis other suppliers. The combination of improved product mix, enhanced efficiencies and reduction in realisations of certain products has also contributed towards the higher EBITDA margin.
Performance for year ended March 2015
For FY'15, net sales grew by 5% to Rs 1327.16 crore. The growth was driven by steady increase in volumes in the FWA segment and a mix of volume growth and higher realization for select products in the established business segments. Exports grew by 4.5% contributing Rs. 524.54 crore while Domestic Revenues grew 4.2% to Rs. 787.33 crore. The top line would have been better but for the recent steep decline in prices of Crude Oil and Petrochemicals and consequent reduction in unit sale prices of some of the company's products.
Bulk Chemical segment grew by 1% to Rs 749.59 crore, while Fine & Specialty segment de grew by 10% to Rs 326.20 crore. Fluorescent Whitening Agent (FWA) grew by 51% to Rs 266.18 crore.
OPM was up by 160 bps to 10.4%. This growth was driven by high value led growth from established business segments due to a favorable shift in product mix. The FWA segment has also begun contributing to OPM in FY15. PBIT for Bulk Chemicals de grew by 20% to Rs 73.54 crore. PBIT margin for the segment stood at 9.8% as compared to 12.5% YoY. PBIT from Fine & Specialty chemicals de grew by 2% to Rs 61.88 crore. PBIT margin for the segment stood at 19% as compared to 17.4% YoY. Profit at PBIT from Fluorescent Whitening Agent stood at Rs 0.66 crore as compared to loss of about Rs 27.13 crore for Mar'14.
Other income was up by 16% to Rs 2.05 crore. Interest and depreciation costs were up by 41% to Rs 36.41 crore and 22% to Rs 36.02 crore. Thus, PBT stood at Rs 67.73 crore, up by 16% YoY. After providing for total tax of Rs 14.30 crore, down by 28% YoY, PAT for the year ended Mar'15 stood at Rs 55.43 crore, up by 39% YoY. The increase in PAT has come about after absorbing higher interest and depreciation expense in FY15 due to full commissioning of the Dahej facility in May, 2014.
Other Highlights
Deepak Nitrite has bagged a sizeable Annual Contract from Bayer Crop Science for supply of two major agro-intermediates.
The company further strengthened its Fine and Speciality Chemicals segment (FSC) by foraying into Pharma Intermediates. The Company has started offering three new drug intermediates for anti-biotics and decongestant therapeutic segments.
The company also forayed into the Personal Care Intermediates segment taking advantage of strict quality compliance requirement. The Company was also able to secure long term annual contracts with several renowned Multi-National Companies.
The Company has successfully commissioned the Hydrogenation plant at Dahej. With the addition of this plant, a greater number of product lines can be developed at the Dahej facility enabling us to better leverage the advantages of the facility including the world class infrastructure, abundant availability of manpower & raw materials and proximity to the port.
As shared earlier, the Board of Directors has authorised the Company to raise an amount upto Rs. 200 crore by way of Qualified Institutions Placement (QIP) of Equity Shares. This was approved by the Shareholders of the Company via postal ballot in April 2015.
Outlook
With the securing of new contracts from Bayer CropScience and the launch of offerings in the pharma intermediates and personal care intermediates, the Company enjoys high visibility of growth in FSC segment. This along with enhanced traction in our export markets will lead to sustained performance going forward. In the FWA segment, the Company is focused on further growth of volumes of OBA products based on healthy demand trends from paper and detergents industries.
Update on Project for Manufacture of Phenol and Acetone
The Board of Directors at their meeting held on 7th August, 2014 approved setting up new capacities for manufacturing Phenol and Acetone. A wholly owned subsidiary, viz. Deepak Phenolics Limited has been set up for this project. The proposed Phenol Plant will be located at Dahej in the State of Gujarat. The capacity of the Phenol Plant will be 200,000 MTPA and that of co-product Acetone will be 120,000 MTPA.
As intimated earlier, Kellogg, Brown & Root International, Inc. (KBR) has been selected for technology and engineering services while M/s. ThyssenKrupp Industrial Solutions (India) Pvt. Ltd. (formerly known as UDHE) has been selected as the EPCM contractor. The project implementation remains on track with conclusion of basic engineering and significant progress has been made in detailed engineering. Key members of the project team have been appointed and enquiry for critical equipment with long lead times has been released. The Company has started seed marketing of phenol with an objective to develop relationships with all major clients in India. The demand for phenol continues to be buoyant in India and is expected to steadily increase based on consumption trends of end-user industries. Phenol imports remain strong and the country's current demand will absorb the entire capacity that DNL plans to install thereby substituting imports. Further, the abundant availability of phenol in the local market is expected to spur pent-up demand which will further grow the market.
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