Capitaline

Analyst Meet / AGM 06-Nov-20

Conference Call

Deepak Nitrite

Expects capex of Rs 400 crore in FY21, which will go up in FY22

Deepak Nitrite held a conference call on 05 November 2020 to discuss the results for the quarter ended Sep'20and way forward.Mr. Maulik Mehta, Executive Director and Chief Executive Officer, Mr. Sanjay Upadhyay – Director, Finance & CFO and Mr. Somsekhar Nanda – Deputy CFOof the company addressed the call.
Highlights of the Concall

In the global chemical supply chain, Deepak nitride continues to take advantage of potential developments as for global China plus one strategy were deemphasizing of the supply chain dependence on China and re emphasizing on strategic partners in other locations, including India has remained a priority at a strategic level of many multinational companies

Consolidated revenues were Rs. 991 crore in Q2FY21 compared to Rs. 1,011 crore in Q2FY20 led by stellar performance from the phenolics business despite increased imports combined with additional contribution from IPA which has enabled the company to substantially recoup the shortfall in standalone revenues.

Standalone revenues declined 22% to Rs. 448 crore as compared to Rs. 572 crore in Q2FY20. Phased recovery from lockdown and social distancing measures impacted utilisation levels on a YoY basis in the standalone operations.

Domestic revenues stood at Rs. 672 crore in Q2 FY21 as against Rs. 767 crore in the corresponding period last year. This was due to constraints to peak capacity utilisation during the quarter.

Export revenues were Rs. 319 crore in Q2FY21 compared to Rs. 245 crore in Q2FY20, higher 30% YoY. The focus was on regions that were on the path to recovery from the effects of the virus while deploying a strategy to take advantage of a depreciated currency to increase export bias.

Standalone EBITDA was 35% lower at Rs. 139 crore as against Rs. 216 crore in Q2FY20. EBITDA margin was 31.1% compared to 37.7% in Q2 of last year. Constraints on peak production at plants due to Covid-19 related restrictions and the reversion of PP segment realisations from the abnormally high base of last year have led to a moderation in the EBITDA margin, which remains robust at over 30%.

Consolidated EBITDA was higher by 8.1% to Rs. 280 crore in Q2FY21 compared to Rs. 258 crore in Q2 FY20 led by robust performance from the Phenolics business.

Basic Chemicals segment topline suffered by 25% because of slow pick up by end use segments such as textile, oil and fuel additives and also due to temporary supply disruption. The company expects volumes and prices to pick up in upcoming months, with some traction already underway in September, as demand from the dyes industry returns to pre-COVID levels.

The Fine & Specialty Chemicals segment delivered a stellar performance with revenue growth of 52% YoY although capacity utilization was affected partially by COVID-19 related government mandates and short term challenges from shipping lines. The business is supported by a strong order book, thereby improving Q3 performance even better.

The company expects sustainable margin in fine and speciality chemicals to be around 40-44%.

Performance Products delivered an exceptional performance last year. The company expected a normalized performance this year particularly in terms of margins. The current pandemic, however, has significantly impacted consumption thereby affecting volumes and margins. The company has seen signs of recoveries in volume and expects to achieve a normalized performance as demand picks up worldwide.

Deepak Phenolics witnessed revenues increase by 26% YoY with EBITDA growth of 229%. New products such as IPA contributed to an increase in the EBITDA Margin which at 25.6% in Q2FY21 was sharply higher from 9.6% in Q2FY20. With manifold increase in exports, the Company was able to maintain high capacity utilization.

The company has incorporated a wholly owned subsidiary company named Deepak Clean Tech Limited ("DCTL") with effect from 9th October, 2020. This subsidiary will carry out business of manufacturing of chemical intermediate products that has similar process competencies to one so the company already has.

The company expects capex of Rs 400 crore in FY21. For FY22 the company expects capex to be higher than FY21 because of Deepak clean tech business.

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