By: ICN Bureau
Last updated : May 10, 2021 10:20 am
Deepak Nitrite Ltd reported 38.62% YoY growth in consolidated sales revenues for Q4FY21
Deepak Nitrite Limited (DNL), one of India’s leading chemical intermediates company, has delivered a phenomenal performance in the backdrop of a challenging macroeconomic environment, despite losing one month of production during the year due to nationwide lockdown.
DNL's diverse product line and operational excellence continue to be strongholds against widespread uncertainties. Amidst the severity of the second wave, the Company continues to function at a high level of efficiency and make progress on growth initiatives, while adhering to Government directives, local guidelines and safety protocols across all its facilities. DNL has either maintained or increased market share across products.
The excellent performance by Deepak Phenolics has more than offset the supernormal profit due to elevated prices of DASDA enabling the Company to report strong growth on a y-o-y basis
PBT has further improved on account of lower interest cost due to reduced debt. Resultantly, PBT was higher by 94% y-o-y surpassing the growth in revenues
The excellent performance in the fourth quarter has helped to elevate the annual performance, enabling the company to surpass the milestone of Rs, 1,000 crore in PBT as it clocked Rs. 1,042 crore
The Company leveraged the optimal utilisation at its plants by participating in both, the domestic and export market, thereby driving earnings
In addition to the sharp recovery in performance, there has been substantial improvement in financial
position as indicated by parameters of debt-equity ratio, debt to EBITDA ratio and interest coverage ratio
Despite loss of one-month production, the excellent performance has enabled the Company to maintain its regular dividend which, accompanied by the special dividend to commemorate the 50th year, has resulted in total dividend of 275%. With this, total dividend outgo would be Rs. 75 crore
Financial Highlights
Q4 FY2021 vs. Q4 FY2020 (y-o-y)
Revenues grew by 39% to Rs. 1,469 crore in Q4 FY21. The Basic Chemicals segment has performed well driven by higher contribution from key products. The F&S segment has also been a growth engine for the quarter as favourable absorption by end user industries has driven volumes and realisations higher.
In Performance Product segment, DASDA prices are now exceptionally lower after prevailing at abnormally high levels in the same quarter last year. This impact was more than offset by the Phenolics business which has capitalized on the improved demand landscape by elevating plant efficiency to generate higher volumes thereby benefiting from prevailing firm realisations.
EBITDA was at Rs. 461 crore in Q4 FY21, higher by 75%. The EBITDA margin is higher by 600 bps to 31% led by favorable pricing environment, higher plant efficiency and operating leverage. This would have been even higher, but for the impact of abnormally high DASDA prices in the base period.
PBT was at Rs. 390 crore in Q4 FY21 higher by 94%. Apart from the improved performance of DPL, PBT has been aided by higher other income and lower interest costs on the back of significant reduction in debt over a 12-month period.
PAT was Rs. 290 crore in Q4 FY21 higher by 68% as compared to Rs. 172 crore in the same period of last year aided by revenue growth and improved operational and financial efficiency.
Consolidated EPS for Q4 FY21 is Rs. 21.27 per share (of face value of Rs. 2 each) as compared to Rs. 12.63 per share in Q4 FY20.
FY2021 Vs. FY2020
Revenues were at Rs. 4,382 crore in FY21 as compared to Rs. 4,265 crore in FY20, up 3%. The accretive performance of the Phenolics business and that of the FSC segment has driven the performance. The Basic Chemicals segment, which witnessed lower demand for products catering to diesel refining has been able to register good traction in nitration based products. Apart from overcoming impact in the PP segment performance this year due to high base of DASDA prices in FY20, the current year’s performance is even more resilient given the fact that, there was one month of production loss due to lockdown.
EBITDA grew by 20% to Rs. 1,269 crore in FY21 compared to Rs. 1,061 crore in FY20. The EBITDA Margin was at 29% in FY21 compared to 25% reported in the previous year. Along with FSC segment, products in Phenolics division contributed to high EBITDA margins.
PBT was higher by 29% to Rs. 1,042 crore in FY21, surpassing the Rs. 1,000 crore milestone. This is despite loss of one month of production in FY21 due to the national lockdown.
PAT was Rs. 776 crore in FY21 as compared to Rs. 611 crore in FY20, higher by 27% aided by higher revenue, more efficient operations and lower interest cost.
EPS for FY21 was Rs. 56.88 per share (of face value of Rs. 2 each) compared to Rs. 44.80 per share in FY20.
Commenting on the performance, Deepak C. Mehta, Chairman & Managing Director, said, “In April, 2020, we decided that the company would prioritize both lives and livelihoods. That financial targets were exceeded was an unexpected outcome. The company ensured that all its locations operated with the highest attention to man and material safety. We have also taken up the responsibility of vaccinating all our employees and spouses and will continue to look for opportunities to provide succour to the 2,000 families that depend on us. The company, in partnership with Deepak Foundation has put up a 40 bed COVID hospital with ICU and oxygen beds, purchased oxygen PSA plants to be deployed at nearby facilities and has taken other appropriate measures. DNL also expanded medical and life insurance coverage for all employees.
Due to the volatility in external environments, the best option for DNL was to become more nimble-footed. The company paid very close attention to internal processes of people management, supply chain and operations and worked to maximize productivity wherever possible. The company gained value from these focused efforts in terms of crossing 115% capacity on the phenol plant, while at the same time optimizing product mix particularly in the Fine and Speciality SBU. As always, the wide range of Deepak’s products helped it to overcome some businesses whose demand was affected by COVID/ oil crisis such as fuel additives and paper chemicals. R&D investments have continued and we are in the process of building a world class Technology Center in Vadodara.
The company has continued to develop its core technology platforms that include nitration, reduction and diazotization. It is investing around 300 crore into products that utilise its core platforms for new agrochemical and pharmaceutical intermediates. Introduction of new platforms including fluorination and photochlorination are also being undertaken. The new investment is expected to be completed by the second half of next year. I am also happy to note that that new products that are being taken up score high marks on DNL’s ‘Right to Win’ checklist.
Looking ahead, I am confident that our efforts will continue to build a redoubtable balance sheet and brand equity which is in line with our values”
Outlook
FY22 begins with trepidation, in much the same way as FY21 did. Global macroeconomic cues however show most geographies coming out of the pandemic with cautious optimism and increased demand.
Effects on the domestic front will only be apparent once the second wave dissipates, but it seems clear that it has enacted a much deeper human toll than the last year.
The company will continue to operate with its ‘People First’ mindset- ensuring man and material safety is the most responsible step a chemical manufacturing company can take. We are well positioned, having maintained or increased market share in all of our products, capital investments which are a mix of upstream and downstream opportunities and an increasing bias toward medium-and long-term contractual agreements which will enable DNL to better utilize it’s comprehensive manufacturing platform which has undertaken brownfield capex to augment capacity for traditional product lines. Companies across the world remain keen to partner with a diversified chemical intermediates player who shares their values and has a track record of responsible management.