May 2010 - Deepak Nitrite Limited

Reaching Out…
Ahead, Above and Beyond!
Deepak Nitrite
Corporate Presentation - May 2010
Safe Harbour
Certain statements in this presentation concerning our future growth prospects are
forward-looking statements, which involve a number of risks, and uncertainties that could
cause actual results to differ materially from those in such forward-looking statements.
The risks and uncertainties relating to these statements include, but are not limited to,
risks and uncertainties regarding fluctuations in earnings, our ability to manage growth,
intense competition in our industry of operations including those factors which may affect
our cost advantage, wage increases, our ability to attract and retain highly skilled
professionals, cost overruns on contracts, client concentration, our ability to manage our
international operations, our ability to successfully complete and integrate potential
acquisitions, liability for damages on our contracts, the success of the companies in which
Deepak Nitrite has made strategic investments, withdrawal of governmental fiscal
incentives, political instability, legal restrictions on raising capital or acquiring companies
outside India, and unauthorized use of our intellectual property and general economic
conditions affecting our industry. Deepak Nitrite Ltd. may, from time to time, make
additional written and oral forward-looking statements, including our reports to
shareholders. The company does not undertake to update any forward-looking statement
that may be made from time to time by or on behalf of the company.
Deepak Nitrite : Snapshot
Deepak Nitrite Limited - A Leading Chemical Company
Deepak Nitrite : About Us
• Established in 1970s by Mr. C. K. Mehta.
• Started out with manufacturing of Sodium Nitrite / Sodium Nitrate and has
evolved to create leadership position in several products
• DNL is a top 3 global supplier for products like Xylidines, Cumidines, Oximes
and is the market leader in India for Sodium Nitrite / Nitrate & Nitro Toluenes.
• Is a preferred supplier to some of the leading global chemical companies and
has cultivated business relationships over 5-10 years.
Deepak Nitrite : About Us
• Has established competitiveness vis-à-vis global peers on
parameters of quality, cost, safety and adherence to
environmental norms.
• Track record of successful acquisitions.
• Multiple products, multiple facilities and multiple customers have
enabled it to create a de-risked business model
Milestones
1984 –
Acquisition of
Sayadri Dyestuffs
& Chemicals
from Mafatlal
group.
1972 –
Manufacturing of
Sodium Nitrite
and Sodium
Nitrate at
Vadodara,
Gujarat.
1972 –
Prestigious
“P. C. Ray”
Award for
innovation
Listing on
Public Markets
1979 –
Co-promoted
Deepak
Fertilizers and
Petrochemicals
Ltd.
1992 –
Multipurpose
Nitro-Aromatics
plant.
1994 –
Hydrogenation
facility near
Mumbai.
2005 –
Relocation of
Sayadri
Facilities to
Vadodara and
Roha.
1999 –
Acquisition of
Aryan Pesticides
Limited.
2006 –
Acquisition of
colour
intermediate
business from
Vasant
Chemicals Ltd.
Facilities
(
1
Corporate Office
Pune, Maharashtra
2
Manufacturing Facility
Roha, Maharashtra
3
Manufacturing Facility
Taloja, Maharashtra
4
Manufacturing Facility
Nandesari, Gujarat
5
Manufacturing Facility
Hyderabad, AP
6
R&D Facility
Pune, Maharashtra
7
Proposed Facility
Dahej, Gujarat
Products & Application
Oximes
Nitro Chloro Benzene
Specialty
Pharma.
Dyes
Rubber Chem.
Agrochemicals
Pigments
Colourants
Xylidines
Pigment
Fuel Additive
Agro chemicals
Pharma interm.
Agrochemicals
Cumidines
Agrochemicals
Sodium Nitrite
Dyes/Pigments
Pharma interm.
Food colours
Electroplating
Speciality chemicals
Colourants
DASDA
Paper
Textiles
Detergents
Nitro Tolunes
Colourants
Speciality chem
Rubber chemicals
Pharmaceuticals
Explosives
Dyes
Specialty chem.
DASDA
Agrochemicals
Revenue - Segmentation by Geography:
2009-2010
FY2009
FY2010
Total Sales
Domestic Sales
Export Sales
47%
53%
End user application wise sales composition
• Colour Business has increased from 42% to 54% of total sales.
• Agro intermediate business has decreased from 39% to 32%
Customer Relationships
•
Deepak Nitrite has a diversified customer base consisting of some of the
largest chemical companies in the world, including Sygenta Global,
Bayer Crop Science, BASF, Kemira, Lanxess, Clariant, Isochem, Lonza
and Sun Chemical.
•
Over 50 % of the company’s FY09 turnover was through exports
•
Long standing relationships - have a history of 5-10 years with several
customers
•
Diversified customer base exposes companies to different industries,
economic cycles and currencies thereby providing a natural hedge
Customer Recognition
Research & Development
• DNL has identified R&D as key differentiator and significant
value creator
• Spends almost 1% of annual revenues on R&D
• Dedicated R&D facility in Pune which is Recognized by
Department of Science and Technology, Govt of India
• R&D Headcount of over 90 personnel - Highly skilled &
experienced technical manpower including 5 Ph. D’s
• State of the Art Pilot Facility as a catalyst between R&D trials
and commercial production
• R&D efforts contributed around 12% of revenue in FY09
Technical Capabilities
Proven ability in handling complex and hazardous chemical processes
Able to optimise processes while meeting standards on product specifications,
product quality and environmental norms
Multi purpose manufacturing facilities provide flexibility to change product mix
Focus on Technical capabilities as a differentiator - R&D efforts also directed towards
improvement of existing processes to enhance competence
EXPERTISE IN:
Hydrogenation / Reduction
Nitration
Sulfonation
Alkylation
Condensation
Phenylation
Oxidation
Nox Production / Absorption
New Product Development
Introduced following three new products in the last one year:
• NSA: Down stream value added product of Inorganic Intermediate.
• Fuel Additives : They are antioxidants, cetane improver for
improving quality of fuels to meet the Euro II/III norms.
DNL has strong synergy with the availability of building blocks and its
expertise to undertake complex manufacturing processes
Forward integration into new segment
Samples approved by domestic & international suppliers
Awarded business from some domestic refineries
Annualised revenue to be in the range of Rs. 75 crore
Xylidines: Agro intermediate, down stream product of existing
products.
Environmental Care
• Priority accorded to adherence of statutory and recommended environmental
norms
• Global customers insist on compliance with environmental standards
• DNL is committed to best practices and technologies for a cleaner,
sustainable world
• Environmental scientists work along with the R&D team right from inception
of process redevelopment to minimise by-products and evolve eco-friendly
technology
Inroads to China & USA
• Made significant inroads into the US agrochemical market
• Secured business from one of the major American agrochemical company
• Exports to China have doubled this year and stand at Rs. 42 crore
• China being one of the most competitive markets to India and the rest of the
world, exports to China is testament to DNL’s competitiveness and quality of
products
Acquisition History
1984 – Sahyadri Dyestuffs
& Chemicals
Entry into production of range
of intermediates for colorants
and imaging chemicals
2000 – Aryan Pesticides
Forward Integration into
Xylidines, Cumidines & NCB
(Nitro Chloro Benzene)
2006 – DASDA Business of Vasant Chemicals
DNL was a leading supplier of NT to
Vasant Chemicals and this acquisition
helped it to forward integrate its operations
to include the DASDA business
Acquisition Strategy
MUST
OFFER
SYNERGIES
MUST
OFFER
VALUE
New Markets
Uncovering
hidden value
New Customers
Reasonable Price
New Products
New Applications
Adequate potential
to realize returns
VALUE
OPTIMISATION
THROUGH
Exploit synergies
to attain growth
Leverage on common
resources to reduce costs
Drive acquiree
to realise potential
Inorganic strategy complementary to Organic initiatives
Differentiators & Drivers
Key Differentiators
Market leader (among top 3)
in almost all the product/market
we operate.
Good balance of Portfolio of
Business.
Integrated operations and
Flexible manufacturing facility,
Ability to change product mix as
Per market requirement.
Global Customer Relationship :
Supplier of choice for leading global
companies
Capability in handling complex
Chemical process like nitration
Hydrogenation & catalytic
reactions.
Increased focused on R&D leading
to new product/process development
Clear edge over peers – R&D
expenditure as a proportion of
Revenues.
Safety & Adherence – Emphasis
On Environmental Norms
Business Drivers
Growth Markets shifting to Asia
Cost competitiveness causing consolidation of weaker players
in developed economies
Reduction in Carbon emission norms
Growth in Environmental Challenging areas
Developing “New Process” Pipeline for established markets
Growth opportunities in Chinese Markets
Growth Drivers
Capacity Expansion
Achieve 100% utilisation at
present location
Greenfield project in Dahej
Deepening of Global
relationships
Value added products &
partnership arrangements
Development of innovative
technologies as a means to
enter mature markets
Expanding product basket
Based on current/new
technologies
Intensifying geographical
reach
New market in-roads,
competitive position in China
Inorganic opportunities
Adding business value with
attractive return on
Invested capital
Capacity Expansion: Dahej
• Greenfield capacity expansion planned at Dahej, in phases
• Already acquired 60 acres land and will invest Rs. 225 crore, in
phases, to set up additional capacities for hydrogenation and
nitration.
• First phase scheduled for completion by December 2011 with
a capex outlay of Rs. 60 crore & Project expected to be
completed by FY12-FY13.
Financials
Deepak Nitrite : Financial Stability
• Consistent track record of paying dividends
• Strong Revenue CAGR of 15% – improving operating cash
flows
• Reduction in interest cost by 50%
• Low gearing :
– FY10 Net D/E of 0.30
• BVPS of Rs. 210
Financials – Total Income
5,829
6,000
4,721
INR million
5,000
4,223
5,465
3,538
4,000
3,000
2,000
1,000
FY06
FY07
FY08
FY09
FY10
Financials – Operating Profit
800
INR million
749
526
385
400
363
385
0
FY06
FY07
FY08
FY09
FY10
Financials – Profit Before tax
INR million
800
400
379
429
204
303
67
0
FY06
FY07
FY08
FY09
FY10
Note: FY07 Profit Before tax includes an amount of Rs. 298 million
as proceeds from sale of land.
Financials – Profit After Tax
400
INR million
360
282
140
200
70
0
FY06
FY07
FY08
FY09
FY10
Note: FY07 PAT includes proceeds from sale of land.
Financials – EPS
50
40.58
40
23.63
31.55
INR
30
20
21.82
10
7.84
0
FY06
FY07
FY08
FY09
FY10
Note: FY07 EPS includes proceeds from sale of land.
Financials – Shareholder Value
Perspective
Financials – FY10 vs. FY09
Revenues
EBITDA
EBITDA (Rs mn)
900.0
749.0
545.0
600.0
300.0
0.0
FY09
FY10
EBITDA
PAT
FY09 performance was bolstered by:
Introduction of NSA – integrated to sodium
nitrite
Introduction of Agro Chemical products
Current year includes effects of post
Chinese Olympics & world wide recession
Key Takeaways
• Well entrenched multi segment chemical company with
leading world players as its customers
• One of the top 3 producers of fine intermediates
• New products/markets opportunities driving growth
• Strong Financials – Low gearing & track record of dividends
Thank you
More information available online:
• Annual Reports
• Quarterly Financial Results
• 5 Years Financial Data & more
http://www.deepaknitrite.com/