Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenues grew by 13% to over INR2,700 crore for the quarter.
- EBITDA increased by 73% to approximately INR494 crore, with margins improving from 12% to 18%.
- Net profit surged by 237% to INR214 crore for the quarter.
- The company's backward integration into ammonia production is proving to be a strong risk mitigator and value capturer.
- The strategic shift from commodity to specialty products, supported by strong R&D, is gaining market acceptance and improving product efficacy.
Negative Points
- The mining and chemicals business experienced a downturn due to monsoon-related disruptions.
- Nitric acid volumes slightly decreased by 1% year-on-year, and IPA volumes fell by 10% due to process constraints and shutdowns.
- The company is still facing high debt levels, with plans to draw additional debt for ongoing projects.
- There are concerns about potential pricing pressure in the technical ammonium nitrate segment due to new capacity additions by competitors.
- The real estate venture remains non-core and does not significantly contribute to the company's financials.
Q & A Highlights
Q: Congratulations on the overall numbers and the margins. How do you see the kind of margin going forward? Can we expect 18% to be a steady state EBITDA margin?
A: We have been delivering these numbers over the past few quarters, and we believe this is a sustainable level going forward. There will always be some cyclicality, but this should be the way forward. - Deepak Rastogi, President, Chief Financial Officer
Q: Regarding the new proposed corporate structure and demerger, will the entities be separately listed?
A: The plan is for each business to be separately listed at an appropriate point in time. There is no specific timeline yet, but we will provide updates as decisions are made. - Deepak Rastogi, President, Chief Financial Officer
Q: What is your roadmap for becoming net debt-free, and what is your target for the steady-state ROCE of the business?
A: We have two ongoing expansion plans, and repayments will start post-commissioning. We aim to expedite repayments when possible. The steady-state ROCE will be high once new projects are operational, targeting 18% to 20% EBITDA margins. - Deepak Rastogi, President, Chief Financial Officer
Q: What was the contribution from ammonia savings this quarter?
A: The contribution from ammonia savings was around INR 45 to 50 crore. These numbers are expected to improve as ammonia prices rise, especially during Q3 and Q4. - Deepak Rastogi, President, Chief Financial Officer
Q: How do you see global demand and supply playing out for ammonia, given recent price increases?
A: Historically, ammonia prices have ranged between $400 to $450 FOB. Prices are typically higher in Q3 and Q4 due to increased demand during harsh winters. - Deepak Rastogi, President, Chief Financial Officer
Q: What is the impact of facility downtime on IPA and nitric acid production, and when will capacity utilization return to normal?
A: We aim for 92% to 98% capacity utilization across plants. Ammonia can exceed 100%. We conduct preventive maintenance to optimize operations, and most facilities should reach 92% to 95% utilization this year. - Deepak Rastogi, President, Chief Financial Officer
Q: Will there be changes to segment reporting post-expansion to provide better visibility into ammonia performance?
A: For now, we will continue with the current reporting structure but will consider changes if appropriate. We provide detailed segment results annually. - Deepak Rastogi, President, Chief Financial Officer
Q: How does Deepak Fertilisers have an edge in the mining chemicals business, and how easy is it to replicate the TCO model?
A: Our TCO model is unique, focusing on outcome-based contracts rather than input-based. We benchmark costs and spot improvement opportunities, which is not easily replicable by others. - Sailesh Mehta, Executive Chairman of the Board, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
