Deepak Fertilizers conducted a conference call to discuss its 3rd quarter results as well as its future growth plans. Mr. N. D. Joshi (Chief Financial Officer) addressed the call.
Highlights
- The revenue during the quarter ended December 2008 grew by 34% to Rs 371.39 crore as compared to the same period last year.
- Although the fertilizer division posted satisfactory growth, the chemicals division under-performed due to retrofit closure of its Technical Ammonium Nitrate (TAN) plant for 59 days to achieve a 33% capacity enhancement.
- Also the timing gap between the finished goods prices and the raw materials price corrections impacted the margins in the chemicals division.
- The nitric acid sales were impacted due to slowdown in the pharma sector that impacted the Acid and IPA sales during the quarter under review.
- During the quarter under review the company did not manufacture any Methanol at all due to inadequate availability of natural gas. Fall in international price of Methanol to around USD 200 per metric tonnes has resulted in the production using Naphtha infeasible. However the company would start production of Methanol as soon as adequate natural gas as feedstock is available.
- However the company traded some quantity of methanol during the quarter. The company incurred a loss to the extent of Rs 2.5 crore due to fall in prices of methanol.
- The fertilizer segment registered a profitable performance, with revenues at Rs. 195.42 crores in Q3 FY09 against Rs. 68.27 crores for the corresponding period in FY08. This was primarily driven by strong sales in the specialized fertilizer segments where the company enjoyed excellent margins.
- The total net profit of the company posted a fall of 9% to Rs 22.38 crore during the quarter ended December 2008 as compared to the same period last year.
- The international prices of both the inputs required by the company as well as the output have started falling since the month of October 2008. However the company believes that the price is at the bottom and has stabilized now. Going forward the prices would trend northward.
- Prices of purchased ammonia and propane has come down. Thus the company would pass on the benefit accrued from procurement to the final consumer.
- Margins in the current quarter is expected to be better as compared to the previous quarter.
- The revenue during the nine-month period ended December 2008 increased by 49% to Rs 1,079.15 crore as compared to the first nine-month of the previous year. The bottom-line increased by 58% to Rs 109.07 crore during the period under review.
- Due to the retrofit closure of the Technical Ammonium Nitrate (TAN) plant for 59 days the capacity was increased from 300 tonnes per day to 400 tonnes per day, thus taking the total capacity of ammonium nitrate to 1,32,000 tonnes per annum.
- The realty segment, which includes revenues from Ishanya, India’s largest Design Centre and Specialty Mall, stood at Rs. 4.25 crores for the third quarter. Ishanya had registered over 1 million footfalls till 26th January 2009 and the conversion rate has been 30-35%. Ishanya now has 50 stores open. 55% of Ishanya is operational and out of this 55% of the commissioned space is leased out.
- However the company is incurring huge expenses in terms of common area maintenance, which for the un-leased area the company has to pay. Thus after the full space is leased out, the company expects an EBIDTA of Rs 14-15 crore from Ishanya during the next financial year.
- The new supplies of natural gas from Reliance would be available by the end of the financial year, which will enhance capacity utilization and revenues.
- During the quarter under review, the company got 0.4 mmscmd of APM natural gas and since January 2009 the company started receiving PMT gas.
- The company is in talks with Reliance for its gas supplies. It is also in talks with ONGC and GSPC. Thus adequate availability of natural gas would increase the capacity utilization of various product baskets as well as improve margins significantly.
- The average price of IPA (Iso Propyle Alcohol) during the quarter ended December 2008 was Rs 50,000 per metric tonnes. The price currently is Rs 42,000 per metric tonne. The price thus has significantly fallen from Rs 70,000 per metric tonnes during September 2008.
- The company’s 300,000 metric tonnes Ammonium Nitrate project at a cost of Rs 650 crore is proceeding smoothly. The company has already spent around Rs 100 crore on this project. The capital expenditure was being funded through internal accruals. However the company is looking at ways to involve Yara for funding the part of the remaining capital expenditure.
- Although the economy is slowing down the company expects a demand –supply mismatch in favor of demand for ammonium nitrate. 70% of ammonium nitrate is used by the coal mining industry and the demand for coal is not going to slow down going forward, due to increasing demand of coal from the power sector. Thus the global demand for ammonium nitrate is expected to be buoyant.
- The 15,000 metric tonnes Ammonia Storage Tank at the JNPT port would be complete in 3 months from now.
- The 450 tonnes per day dilute Nitric Acid plant at Taloja would be complete by June 2009.
- The total debt in the company’s book as on December 2008 is around Rs 450 crore.