Deepak Nitrite Once Again Delivers Exponential Growth in PAT During Q2 FY2020

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 and half year ended 30th September 2019.

Deepak Nitrite Ltd (DNL) reported a record performance in Q2 FY20 on the back of strong fundamentals for the business. The Company has successfully leveraged its manufacturing excellence, world scale, integrated operations and cost competitiveness to emerge as a supplier of choice for marquee global customers.

In the backdrop of reverse globalisation, trade wars and a reset in global supply chains for the chemical industry, manufacturers are being evaluated on parameters beyond costs and aspects such as environmental practices, human resource practices, ability to deliver consistently amidst an environment of high volatility and ability to manage scale have emerged as key determinants. DNL has fared favorably against these parameters towards winning market share.

CMD's Message

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 capitalize 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 capitalized 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 the commissioning of the plant and we are proud to have contributed to nation-building by successfully substituting imports. We are pleased to have stabilized a global scale plant in record time as we rapidly achieved optimal utilization 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."

Financial Highlights (Standalone)

Q2 FY2020

Revenues stood at Rs. 572 crore in Q2 FY20 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 all-round performance across key products and markets. The Fine & Speciality Chemicals segment witnessed a stable performance as the Company continued to take a strategic position on select products enabling higher margins amidst temporary volume moderation.

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 rationalizing production towards those products enjoying high realizations 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. EPS for Q2 FY20 was Rs. 13.10 per share (of face value of Rs. 2 each) as compared to Rs. 2.06 per share in Q2 FY19

Performance Highlights

Domestic & Exports

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 the 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 capitalize on the opportunities emerging across the global industry landscape to ensure a better export performance.