Deepak Nitrite Reports a Stellar Performance in Q1 FY20

Ranked among Fortune Next 500 and recognized among the top 25 wealth creators by Fortune Magazine, India, Deepak Nitrite (NSE - DEEPAKNTR) (BSE - 506401) is acknowledged as one of the country's fastest-growing chemical intermediate companies. It has a diversified portfolio of intermediates that cater to the dyes and pigments, agrochemical, pharmaceutical, plastics, textiles, paper and home and personal care segments in India and overseas. Its products are manufactured across five locations, which are all accredited by Responsible Care. Deepak Nitrite Limited has announced its financial results for the quarter ended 30th June, 2019.

Deepak Nitrite Ltd (DNL) has delivered a stellar performance in Q1. In the backdrop of volatility in global trade and a slowdown in the domestic economy, DNL has reported over 30% growth in standalone revenues on a Y-o-Y basis. DNL has leveraged its global scale plants and expertise in manufacturing of chemical intermediates to capitalize on opportunities arising out of international events.

Deepak Phenolics Ltd. (DPL) weathered the pricing volatility and compression in spreads in key products as it continued with its growth momentum while significantly contributing to the consolidated performance. The DPL plant continues to operate efficiently and the Company has elevated the capacity utilization to over 90% in Q1FY20 on a sustained basis.

CMD's Message

Commenting on the performance, Mr. Deepak C. Mehta, Chairman & Managing Director, said, "We are pleased to deliver outstanding performance in the first quarter of the fiscal year 2020 with robust growth of 31% in Revenues and almost 4x growth in Profit After Tax on a Y-o-Y basis. Our global scale facilities and capabilities in manufacturing of chemical intermediates have enabled us to benefit from the shutdown of facilities in China and resultant disruption in global supply chains.

The Performance Products segment has been the key enabler of profit accretion this quarter while the other two segments also have exhibited sustainable performance. Let me highlight that Deepak Nitrite is the only company in the world that manufactures performance products from basic building blocks, thereby present throughout the value chain. Disruption in a few segments across this value-chain has led to significant price increase and Deepak has been continually benefitted out of this development. Furthermore, high-performance OBA products launched recently has received a positive response, further elevating our performance. All this has led to the higher-than-expected contribution of PP segment to total turnover, as compared to the previous year.

Our Basic Chemicals segment also realized positive topline growth with higher contribution supported by demand pick up for Nitro Derivatives. Fine & Speciality Chemicals segment witnessed a stable performance. Due to the cyclical nature of the business, the performance is expected to improve in the ensuing quarters.

During the quarter under review, we witnessed heighten price volatility and compression of spreads in Phenol on account of worldwide slowdown in the auto industry which impacted the demand for Phenol-based derivatives. On the flip side, I am happy to state that we were able to achieve over 100% capacity utilisation in Q1 FY20. This is commendable considering that we commissioned the Phenol plant only last year in November 2018. We believe that the Phenol prices may move up worldwide, from the third quarter.

Overall, the business is firing on all cylinders and the endeavor is to leverage the favorable tailwinds and steadily increase market share in key verticals to enhance value creation for stakeholders."

Financial Highlights (Standalone)

Q1 FY2019

· Revenues were Rs. 554 crore in Q1 FY20 compared to Rs. 422 crore in Q1 FY19, up by 31% Y-o-Y. Robust Q1 performance was driven by healthy momentum in the Performance Products segment, which reported strong volume as well as realization gains as key customers approved of new, high-performance OBAs. In the segments of Basic Chemicals and Fine & Speciality Chemicals, the Company has taken strategic positions on key accounts which resulted in temporary volume moderation in key products but enabled it to realize improved margins.

· EBITDA stood at Rs. 188 crores, higher by 231% as against Rs. 57 crore reported in the same period last year. EBITDA margins touched an all-time high of 34% compared to 13% in the same period of last year. Apart from the benefit of strong realizations in the performance products segment, the Company delivered improved profitability in segments of Basic Chemicals and Fine & Specialty Chemicals too. The flexibility of plants to manufacture multiple products allows DNL to move its production to high margin products that enjoy better scenario. · PBT was Rs. 164 crore in Q1 FY20 increasing by 392% over Rs. 33 crore in the same period last year.

· PAT grew 4x to Rs. 107 crore in Q1 FY20 compared to Rs. 22 crore in Q1 FY19. The Company has reported standalone quarterly profit of over Rs. 100 crore for the first time in its history.

EPS for Q1 FY20 was Rs. 7.87 per share (of face value of Rs. 2 each) as compared to Rs. 1.60 per share in Q1 FY19.

Performance Highlights

Domestic & Exports

· Domestic revenues for the quarter stood at Rs. 320 crores as compared to Rs. 265 crore in the same period last year, delivering growth of 21% Y-o-Y. The positive demand landscape combined with higher realization gains supported this growth which was driven by the PP segment which showed improved performance parameters have been well received by customers. · Revenues from exports were Rs. 227 crore in Q1 FY20 compared to Rs. 154 crore in Q1 FY19, resulting in the robust growth of 47% Y-o-Y. The export performance was driven by the ability to gain market share with global customers on the back of shifts in global capacities for certain products.