Deepak Fertilisers and Petrochemicals Corporation Limited reports strong growth and margin expansion in Q1FY25

Date:08-02-2024

Deepak Fertilisers and Petrochemicals Corporation Limited (BSE: 500645; NSE: DEEPAKFERT), one of India’s leading producers of industrial & mining chemicals and fertilisers (″DFPCL″ or the ″Company″), announced its results for the first quarter ended June 30, 2024.

Key Highlights for Q1FY25:

• Revenue delivered was Rs.2,281 Crores, marginal decline by 1.4% on YoY basis due to lower commodity prices.

  
  

• EBITDA margin improved to 20.4% against 12.1% on YoY basis.

  
  

• PAT was Rs.200 crore which is 76% higher on YoY basis.

  
  

• Segment Performance:

  
  

• Chemical Segment (Mining and Industrial Chemical) contributed about 57% of total revenue which grew by 5% YoY mainly driven by improved demand in TAN business.

  
  

• Fertilisers Segment contributed 43% of total revenue which was lower by 9% YoY because of delay in monsoon which post July has picked up very well.

  
  

• Reduction in key RM Prices during Q1FY25 has resulted in lower NSP: Ammonia ▼ ~36% YoY; MOP ▼ ~37% YoY; Gas ▼ ~7% YoY ; while delivering improved overall margins.

  
  

• Launched Croptek grade for Soyabean Crop and Smartek grade for Paddy-& Pulse.

  
  

• The National Budget has proposed Duty hikes on Ammonium Nitrate and Duty reductions on the Precious Metals used for Catalysts, both will have a positive impact.

Commenting on the performance, Mr. Sailesh C. Mehta, Chairman & Managing Director:

"DFPCL has delivered an impressive performance for Q1FY25, with notable increase in EBITDA margin by 823 bps YoY, up from 12.1% to 20.4%.

The businesses are reaping the benefits of backward integration of Ammonia plant which has helped mitigate supply chain risk as well as price volatility and the benefits are captured within the group.

Also, the strategy of moving from commodity to speciality has been working to sustain and enhance the margins of the businesses.

• Mining chemical segment demonstrated robust volume and margin growth supported by stable imported Fertliser Grade Ammoniam Nitrate (FGAN) prices and lower ammonia prices. The proposed duty hike on ammonium nitrate will also help going forward.

  
  

• The fertilizer business volume was driven by Croptek and specialty fertilizers, providing cropspecific solutions to farmers. Despite delayed monsoon and high inventory of phosphatic fertilizers, volumes slightly declined by 3% YoY. With rains predicted to be above normal, we expect volume growth in the coming quarter, boosted by new launches: Croptek grade for Soyabean and Smartek for paddy and pulses.

  
  

• Margins of Nitric acid are stable with volumes lower on YoY basis due to extended repair in WNA plant. The IPA business declined by 8% YoY due to the planned shutdown of the plant. Going forward, we expect stable demand in both Nitric Acid and IPA segment.

Hon'ble National Company Law Tribunal (NCLT), Mumbai, has approved demerger plan for the Mining Chemicals and Crop Nutrition businesses. This strategic restructuring is a step towards achieving our vision of transitioning from Commodity to Specialty and moving from Customer to Consumer by providing holistic solutions, driven by specific business strategy, market leadership, technology and operational focus.

Further, as indicated by the national budget and the government’s continued focus on critical sectors such as agriculture, power, mining, and infrastructure, which is promising for the company from both short-term and long-term perspectives.

We continue to maintain sharp focus on operational efficiences, drive cost optimizations, capacity utilization, and productivity improvements, which will help us navigate through market challenges and remain steadfast in adding value to our shareholders."

Crop Nutrition Business (Fertilisers) Review

• During the quarter, sales of manufactured bulk fertilisers was 174 KMT, representing an 11% increase YoY.

  
  

• The company has launched Smartek fertilizer for paddy, pulses, and cotton, along with the Croptek grade for soybean crops

  
  

• Sales of specialty fertilizer product, Bensulf, amounted to 10 KMT this quarter, reflecting a 51% increase YoY.

  
  

• Sales of traded specialty fertilisers in Q1FY25 saw an 80% increase YoY. With global prices for water-soluble fertilisers stabilizing, demand has now returned to normal levels.

  
  

• Business Outlook: With better monsoon, the demand outlook is positive. The company is focusing on on delivering crop specific and water soluble fertilizers which deliver higher yield and productivity to the farmer. Additionally, the recent partnership with Israel based Haifa Group will help to promote high-performance specialty fertilisers.