Period Ending: Jan. - Mar. 2002

Capitalmarket.com - June 17, 2002

Restricted supply of gas limits its growth

Deepak Fertilisers and Petrochemicals Corporation Limited (DFPCL), a leading manufacturer of phosphatic fertilisers and industrial chemicals has posted 22% drop in net profit to Rs 48.64 crore for the full year ended March 2002.

The restricted supply of natural gas has resulted in lower production of Methanol and Ammonia. To keep up fertiliser production, the company had to resort to purchase of Ammonia at significantly higher price affecting profitability.

Sales rose marginally by 4% to Rs 493.95 crore. Operating Profit Margin decline to 19.9% as against 27.5% in the previous year, while operating profit decreased 24% to Rs 98.35 crore. The margins were lower mainly due to increase in the raw material cost (including traded goods purchases), staff cost and miscellaneous cost. The raw material cost (including traded goods purchases), staff cost and miscellaneous cost (each as a % to sales, net of stock) has reduced to 53.6%, 6.4% and 19.6% as against 50.6%, 5.8% and 17.4% respectively in the previous corresponding year ended March 2001.

Other income rose 8% to Rs 18.32 crore. Interest expenses decreased 26% to Rs 21.24 crore, while depreciation rose marginally by 4% to Rs 28.76 crore. Thus PBT and EO stood at Rs 66.67 crore down 27% Extraordinary expenses represent (a) provision of Rs. 1.74 crore towards write-down in the value of equipment's of shelved portion of C02 project; and (b) provision for taxation of Rs. 0.62 crore on the net amount realised from the overseas insurer in respect of DAP claim of Rs. 1.73 crore which was accounted in the quarter ended Dec. 2001. Taking into consideration all the above, net extra-ordinary items for the year ended March 2002 amounted to Rs. 0.63 crore down 90%. Taxation provision decreased 27% to Rs 15.98 crore, while deferred tax stood at Rs 1.42 crore. Thus net profit stood at 48.64 crore down 22%.

The Government of India is yet to notify final subsidy on fertiliser for the current year and hence the amount of subsidy is accounted on the existing methodology linked with indigenous DAP.

During the quarter ended March 2002, sales fell marginally by 1% to Rs 113.63 crore. However margin dropped substantially to 28.8% from 40.1% due to reason explain above. Operating profit fell 29% to Rs 32.74 crore.

Other income dipped 41% to Rs 6.16 crore. Though interest expenses and depreciation both decreased 14% and 24% to Rs 4.55 crore and Rs 6.64 crore respectively, PBT & EO fell 35% to Rs 27.71 crore. EO expenditure as explain above stood at Rs 2.36 crore down 63%. Tax provision decreased by 62% to Rs 5.43 crore, while deferred tax stood at Rs 0.67 crore. Net profit stood at Rs 19.25 crore down 12%.

The Board of Directors has recommended a lower dividend of 20% (Previous year 25%) on the equity Shares of the company for the year ended March, 2002 amounting to Rs. 14.95 crore.

Further the Board of Directors of the company has approved the buy back of equity shares of the company upto 10% of its paid up capital and free reserves. Accordingly, 1,83,01,236 equity shares of Rs.10/- each fully paid up would be considered for buy back from the open market through stock exchange at a price not exceeding Rs.22/- per share.

Moreover the company plans to expand the capacity of its prilled Ammonium Nitrate (AN) unit in Taloja, Maharashtra, by 30,000 tonnes per year from the existing 70,000 tonnes. It has planned outlay of Rs 55 crore for the project. The project is expected to be fully commissioned by September-October. Plant will be based on imported ammonia, which will be handled through the company's upcoming storage facilities at Nhava Sheva (near Mumbai), and will be set up on the well established technology supplied by Grande Paroiss (GP) of France. The site work is already underway, and the plant is likely to be fully commissioned by September-October 2002. As per its long-term growth strategy, the company commissioned an additional weak nitric acid plant imported form Ireland last year to supply the key raw material for AN.

The new AN plant will help bring further economies of scale, and consolidate volume driven competitive strategies, both in domestic and international markets. This will also help the company to focus on value-added products and services in the near future. The company is a pioneer and a leader for over a decade in the filed of manufacturing prilled AN, which is also used by the mining and construction industry in India.

Segmental Results

The company is engaged in two broad business segments namely Chemicals & Fertilisers.

Chemicals

The revenues grossed Rs 256.09 crore and Rs 64.07 crore, yielding Rs 86.16 crore and Rs 20.10 crore as Profit Before Interest & Tax (PBIT) for full year and quarter ended March 2002 respectively. This segment has contributed 48% & 51% each of the company's revenues and 91% & 62% of PBIT for full year & quarter ended March 2002 respectively. It is thus a significant contributor to the company's profits The total capital employed for this segment works to Rs 242.51 crore, which constitutes 59% of the total capital employed.

Fertilisers

Fertilisers business contributed revenues of Rs 267.69 crore and Rs 61.04 crore, yielding PBIT of Rs 10.70 crore and Rs 14.49 crore during full year and quarter ended March 2002 respectively. This segment has contributed 50% & 48% of the company's revenues and 11% & 45% of PBIT for full year & quarter ended March 2002 respectively. The total capital employed for this segment works to Rs 157.57 crore, which constitutes 39% of the total capital employed.

Earning Per Share on the basis of full year ended March 2002 works out to Rs 6.60. Currently the shares are traded at Rs 20 on BSE, thus discounting the EPS by 3 times.

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