Deepak Fertilisers and Petrochemicals Corporation Ltd's consolidated revenue for Q4FY18 came in at Rs1,905cr, up by 60.4% yoy. The operating profit for the quarter came in at Rs129.76cr, marginally up by 0.7% yoy. However, the EBITDA margin declined by ~403bps yoy to 6.8% in Q4FY18. The net profit attributable to the owner for the quarter stood at Rs37.90cr, up by 18.6% yoy. The revenue beat the street estimates by 28%. However, the operating profit and net profit missed the street estimates by 18% and 37%, respectively.
Gross profit margin of the company declined significantly by ~800bps yoy to 19.1% in Q4FY18. This led to decline in EBITDA margin of the company for the quarter. The decline in gross margins is attributable towards an increase in raw material costs, especially Natural Gas and propylene coupled with depressed margins in acids. Ammonia and natural gas prices increased by 32% and 25% yoy during the quarter.
The employee benefits expense and other expenses increased significantly by ~17% and ~23% yoy to Rs68.29cr and Rs166.49cr respectively in Q4FY18. This led to further decline in the EBITDA margin of the company.
Chemicals segment witnessed significant revenue growth of 61% to Rs1,454.11cr whereas the segment EBIT increased by 25.9% yoy to Rs140.26cr. However, the EBIT margin declined by ~269bps yoy to 9.6% in Q4FY18.
All the manufactured products in chemical segment reported growth in volumes during Q4FY18. Technical Ammonium Nitrate continued to operate on higher capacity utilization based on improved demand.
Fertilisers segment revenue increased by 30.3% to Rs445.92cr. The segment reported loss of Rs18.26cr in Q4FY18 as against Rs11.85cr in Q4FY17. Sudden price increase of phosphoric acid, which was not passed through during the quarter impacted overall segment profitability. As the new NPK plant stabilizes and capacity utilization increases, the company would be able to replace traded products with better margin manufactured products.
The effective tax rate for the year was at 28.5% in FY18 as against 32.6% in FY17. The drop in the effective tax rate is on account of reversal of provision of earlier years amounting to Rs800cr in FY18.
The Department of Fertilisers (DoF), Ministry of Chemicals and Fertilisers, had withheld subsidy, due to the Company in accordance with applicable Nutrient Based Subsidy (NBS) scheme of GOI, alleging undue gain arising to Company on account of supply of cheap domestic gas. The company challenged the DoF order before the High Court of Bombay. Based on the directive of the Court, DoF agreed to release subsidy withheld, except a sum of Rs310cr pending final decision, which has been released during the month of January 2018 against a bank guarantee of equal amount.
The finance cost of the company has increased significantly by 105% yoy to Rs57.63cr in Q4FY18. Total debt of the company (long term and short term) has increased significantly to Rs3,464.74cr as on March 31, 2018, as against Rs1,669.21cr as on March 31, 2017.
The board of directors have recommended dividend of Rs6 per share for FY18, subject to shareholders’ approval in annual general meeting.
Deepak Fertilizers & Petrochemicals Corp Ltd is currently trading at Rs328, down by 15.6 points or 4.54% from its previous closing of Rs343.60 on the BSE. The scrip opened at Rs. 350.65 and has touched a high and low of Rs350.65 and Rs324.70, respectively. So far 1,41,548 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.
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