Deepak Nitrite Ltd has posted a 17.5% year-on-year (YoY) rise in net profit at Rs. 205.08 crore for the second quarter ended September 30, 2023 compared to Rs. 174.47 crore during the corresponding quarter ended September 30, 2022. The company's revenue from operations declined 9.4% to Rs. 1,778.05 crore against Rs. 1,961.65 crore in the corresponding period of the preceding fiscal.

For H1 2024, Deepak Nitrite has posted net profit of Rs. 354.98 crore as compared to Rs. 409.09 crore during H1 2022. Revenue from operations in H1 2024 stood at Rs. 3546.39 crore compared to Rs. 4019.64 crore during H1 2023. 

Commenting on the performance for Q2 & H1 FY24, Deepak C. Mehta, Chairman & Managing Director, Deepak Nitrite Ltd., said: “As we progress through FY24, the headwinds on account of inventory destocking by China, deteriorating geopolitical landscape, continued volatility in commodity and petrochemical prices and foreign exchange rates, have intensified further. When combined with the situation of oversupply in certain products as well as trend of subdued realisations at present, has created an almost perfect formulation of challenges.

“Our focus on elevating operating excellence, optimizing asset use, product mix optimization and implementation of robust business controls have enabled us to better navigate the plethora of challenges than earlier. As a result, amidst this backdrop, we have delivered a strong performance by engaging with customers and were able t preserve or grow market share while maintaining leadership position across key products.

“Our strategic positioning uniquely equips us to capitalize on the growing demand and aligns with the nation's drive towards import substitution. We have recently commenced construction of a State-of-the-Art R&D Centre at Vadodara to accelerate the pace of innovation within the group, which will further enhance our ability to leverage this evolving trend.

“The significant investments by us over the last several years and those planned in the near future reflect our eagerness to seize opportunities not only within India but on the global stage as well. We are continuously broadening our product range by introducing innovative intermediates, expanding our customer base, and augmenting our overall value proposition. Backed by a robust financial foundation, strong client relationships, and well-thought-out growth investments, we are well-positioned to elevate our business offering.”

According to the company, the global chemical industry continued to witness considerable challenges in Q2 FY2024,. The industry has witness demand slowdown in certain countries and segments. There has been inventory destocking by Chinese suppliers, driven by the optimization and normalization of supply chains post the tumultuous COVID years. The increase in the cost of capital due to the steadily rising interest rates over last 18 months, has also contributed to the trend of lower demand.

Despite these headwinds, the business has exhibited commendable resilience. The performance trajectory has been maintained due to sustained demand emanating from end-user industries. The company was able to sell higher volumes and retain our market share. While the external situation is transitionary in nature, Deepak Nitrite has been systematically undertaking strategic measures to elevate its growth momentum in the long run through several backward and forward integration projects. The commissioning of these projects alongside others are scheduled periodically over the next few quarters and will aid the Company in addressing and mitigating the challenges posed by the evolving market dynamics.

Given this backdrop, the Deepak Nitrite has reported sustained operating performance with volume as well as realisation gains for several key products. This is in addition to favorable product mix to achieve the profitability benchmarks. Furthermore, market share and wallets share has been maintained, which is a testament to the company’s continued efforts of preserving the high operating efficiency and focus on long-term contracts.

It is worth noting that Deepak Nitrite has undertaken substantial efforts to de-risk its business model by expanding its product portfolio.

Performance overview & other highlights

➢ The Company weathered the persistent negative impact of global destocking and achieved volume gains on both year-on-year and quarter-on-quarter basis.

➢ Focused efforts towards capitalizing on byproduct valorization opportunities.

➢ Prioritizing import substitution and increasing domestic contributions has partially mitigated the impact of demand challenges in the EU and USA; India continues to be in a sweet spot due to energy crisis in EU.

➢ The Company remains debt-free, with a net worth of Rs. 4,342 crore.

➢ Deepak Nitrite has cumulatively invested Rs. 599.50 crore in DCTL (wholly owned subsidiary), out of which Rs. 100 crore was invested in Q2 FY24.

➢ Deepak Nitrite invested approx. Rs. 17 crore in equity of Deepak Oman Industries; it holds 32% stake as part financing equity to set up SNI/ SNA project at Oman.

Project Status

➢ Construction work of PhotoHalogenation and fluorination has made significant progress; operations and commissioning teams are actively engaged for system handover, and plant commissioning is expected by December 2023

➢ For Acid Unit, most of the engineering work I complete; on-site construction is making rapid progress

➢ Other expansion projects including MIBK, MIBC, Hydrogenation among others are taking shape and will be commissioned as per plan.

➢ Polycarbonate compounding project is taking concrete shape and is under implementation as per plan.