DMCC Speciality Chemicals Limited, a leading Indian manufacturer of sulphur chemistry solutions, reported a sharp decline in profitability for the second quarter of FY27.
This, as persistently high sulphur prices and a widening gap between sulphur and sulphuric acid prices squeezed margins and weakened demand across key end markets.
The company's consolidated profit after tax (PAT) fell 43.88% year-on-year to Rs 3.23 crore for the quarter ended September 30, 2026. EBITDA declined 18.79% to Rs 11.62 crore, while EBITDA margin contracted to 4.25%, down 707 basis points from the corresponding quarter last year.
Revenue from operations, however, surged 116.51% year-on-year to Rs 272.88 crore.
The company attributed the earnings pressure primarily to an adverse commodity cycle, with sulphur prices remaining elevated at levels that could neither be absorbed by the company nor passed on through higher sulphuric acid prices.
The widening price gap triggered significant demand destruction across end markets, while a substantial portion of industry sales took place below production costs.
In response, DMCC deliberately operated its plants below optimal capacity, choosing to avoid uneconomic volumes rather than compromise profitability further.
"Q2 FY27 was a challenging quarter for the Company. Sulphur prices stayed elevated throughout the period and rose to a level that could not be absorbed or passed on through sulphuric acid prices. The resulting divergence between the two caused significant demand destruction across our end markets.
"A large share of sales in the market also took place at prices below the cost of production. Given how unfavourable the commodity cycle was, we took a conscious decision to run our plants below optimum capacity and avoid uneconomic volumes."
The company, however, indicated that market conditions have begun to improve. Sulphur prices have eased from their peaks since mid-October, while availability has improved significantly, prompting DMCC to ramp up production.
DMCC's borrowings increased during the quarter, reflecting higher working capital requirements arising from elevated sulphur prices.
Long-term borrowings also rose following the company's mobilisation of funds at subsidised rates under a government scheme designed to support businesses adversely affected by the conflict in the Middle East.
Amid pressure on its core operations, DMCC's speciality chemicals business continued to register steady progress.
The company increased production in its Boron segment, while its broader speciality chemicals portfolio maintained steady demand, particularly in export markets. Capacity utilisation also began to improve, moving above levels recorded in previous quarters.
Speciality chemicals accounted for 27% of total sales during the quarter, while bulk chemicals contributed the remaining 73%. Exports made up 12% of revenue, with domestic markets accounting for 88%.
While sulphur prices and availability have shown signs of improvement, DMCC remains cautious about providing forward guidance, citing continuing macroeconomic uncertainty.
Commenting on the Q2FY27 performance, Bimal Goculdas, Managing Director and CEO, said: "The decline in profitability this quarter therefore reflects mainly the commodity cycle and the complete divergence between sulphur and sulphuric acid prices. Since mid-October, sulphur prices have come off their highs and availability has improved significantly. We have ramped up production to match these better conditions.
"Our borrowings rose during the quarter. The increase in short-term borrowings comes from a higher working capital requirement, driven by elevated sulphur prices. The increase in long-term borrowings comes from funds we raised at subsidised rates under a Government scheme for businesses adversely affected by the conflict in the Middle East.
"Our speciality chemicals business continued to make good progress. In the Boron segment, we increased our output further. The wider speciality chemicals portfolio saw steady demand, particularly in export markets. Capacity utilisation has started to inch up and is now higher than in earlier quarters."
He added: "The macro environment is still too uncertain for us to predict or give guidance. However, once the operating environment stabilises and sulphur prices cool off, I am confident we will deliver performance that is more sustainable and more representative of DMCC’s capability and capacity."
