DCW Limited announces Q1FY21 results with 60% PAT growth QoQ

PVC & C-PVC leads the performance

DCW Limited (“the Company” or “DCW”), a speciality chemicals company headquartered in Mumbai, declared the financial results for the quarter ended on 30th June 2020 on Wednesday, 12th August 2020. 

Impact due to Covid-19 on business operations-

The Company restarted factory operations from 15th April 2020, adhering to the safety norms prescribed by various authorities.

 •  Impact on financials:
    Disruption in the supply chain, coupled with lockdowns imposed by the various authorities impacted production and logistics in April and May 2020.

Improvement in operational parameters –

 •   Caustic Soda: The sales volume was higher by about 119% sequentially. The revenue too witnessed an increase of 14.6% sequentially, which stood at INR 1,214 mn as against INR 1,059 Mn in Q4FY20.
 •   C-PVC: The capacity utilisation during the quarter improved to 73% as against 58% in Q4FY20. The sales volume was higher by about 16% sequentially. The revenue too witnessed an increase of 22% sequentially which stood at INR 266 mn as against INR 218 Mn in Q4FY20.

Financial Performance – Q1FY21

 •  Total revenue from operations for Q1FY21 stood at INR 2,854.1 Mn, compared to INR 3165.4 Mn in Q1FY20 and INR 2,981.5 Mn in Q4FY20, de-growth of 9.8% and 4.3% respectively, primarily due to COVID-19 related disruptions.
 •  Although the revenue declined by 4.3% sequentially, EBITDA grew by 123.4% to INR 333.8 Mn for Q1FY21, compared to INR 149.4 Mn in Q4FY20. The growth in EBITDA is primarily due to higher capacity utilisation.
 •  PVC operating margins were boosted by tactical procurement of raw materials.
 •  Post anti-dumping duty by Govt of India on import of C-PVC has led to better realisations. NSR for C-PVC has seen an improvement of about 7% QoQ.
 •  PVC and C-PVC contributed ~40% of the total revenue ~68% of EBIT in Q1FY21.
 •  EBITDA margin for Q1FY21 stood at 11.7% compared to 5.0% in Q4FY20.
 •  Q1FY21 profit after tax stood at INR (98.4) Mn on a QoQ basis from INR (250.6) Mn. Cash PAT for Q1FY21 stood at INR 117.9 Mn.

Commenting on the results, Mr. Vivek Jain, Managing Director, DCW Ltd., said, “Throughout the ongoing situation, employee safety has remained our foremost priority. The Company’s performance in Q1FY21 was better than Q4FY20, on account of better volume sales and realisations coupled with efficient handling of raw material and other operational costs. Despite the unprecedented times, we were able to quickly scale up the production owing to pick-up in demand for our products, especially CPVC. The recovery in business, particularly in the speciality chemical business is encouraging, and we expect to get back to normalcy by the fourth quarter of this year. During Q1FY21, we have adopted a new strategy with a focus on the supply chain, capacity utilisation, conservative approach towards capex and reduction in operating costs. During the quarter, there was no significant change towards liquidity position. We remain committed towards efficient handling of capital.

Going forward, the company aims to increase the revenue contribution from speciality chemicals like C-PVC and SIOP while keeping the production and utilisation of commodity chemicals like Caustic Soda,PVC and Soda Ash to its optimum level. The company has recalibrated its growth and value creation strategy and will strive towards achieving these goals.”                                                                                                                 

Speciality Chemicals Division – Q1FY21

The company’s speciality chemical division consists of SIOP and C-PVC. The company is one of the few large-scale synthetic iron oxide manufacturers for red and yellow pigments. The company is the only C-PVC manufacturer in India. The company’s speciality chemicals facility is based out of Sahupuram, Tamil Nadu.

The company is focusing on increasing the revenue mix from speciality chemicals. The revenue mix between Commodity Chemicals: Specialty Chemicals for Q1FY21 stood at 87%:13%  compared to 88%:12% and 92%:8% in Q4FY20 and Q1FY20 respectively. 

SIOP Division

 •  Revenue for Q1FY20 stood at INR 102.9 Mn, as against INR 66.7 Mn in Q1FY20 and INR 150.5 Mn in Q4FY20.
 •  Revenue grew on an annual basis largely due to debottlenecking of the capacities. NSR improved by 5% on a QoQ basis.
 •  EBIT for Q1FY21 stood at INR (56.4) Mn, as against INR (60.7) Mn in Q1FY20.

C-PVC Division

 •  Revenue for Q1FY21 stood at INR 265.9 Mn, a robust growth of 23.2% and 52.6% on a QoQ and YoY basis respectively.
 •  Robust growth in the C-PVC revenue is largely attributed to strong domestic demand and favourable government policies.
 •  EBIT for Q1FY21 stood at INR 52.7 Mn, a growth of 177.8% on a QoQ basis.
 •  Capacity utilisation in Q1FY21 stood at 73% as against 58% in Q4FY20 and 89% in Q1FY20 respectively.

Commodity Chemicals Division – Q1FY21

The company’s commodity chemical division consists of Caustic Soda, Soda Ash and PVC. Soda Ash facility is based out of Dhragandhra, Gujarat, while Caustic Soda and PVC facilities are based out of Sahupuram, Tamil Nadu.

Caustic Soda Division:

•  Revenue for Q1FY21 stood at INR 1,213.3 Mn, a growth of 16.3% on a QoQ basis and a modest de-growth of 3.9 % on a YoY basis. The growth in revenue on a QoQ basis is primarily attributed to higher production.
•  EBIT for Q1FY21 stood at INR 53.8 Mn, as against INR 227.4 in Q4FY20. The fall in EBIT is largely attributed to a fall in demand and subdued prices in the market.

Soda Ash Division

•  Revenue for Q1FY21 stood at INR 366.9 Mn compared to INR 557.0 Mn in Q1FY20 and INR 419.2 Mn in Q4FY20.
•  EBIT for Q1FY21 stood at INR 10.1, as against INR 135.7 Mn in Q4FY20. EBIT margins were impacted primarily due to fall in capacity utilization.

PVC Division

•  Revenue for Q1FY21 stood at INR 847.9 Mn, de-growth of 19.7% and 21.98% on a YoY and QoQ basis respectively.

•  EBIT for Q1FY21 stood at INR 27.1 Mn, as against INR (94.9) Mn in Q4FY20.
•  EBIT margins improved sequentially due to improvement in the average realization.

Outlook:

•  The margins in PVC are expected to remain better on account of favorable market condition, and higher capacity utilization. (Q1 margins may not continue due to increase in raw material prices, though in absolute terms profit may increase)
•  The trend in C-PVC is expected to remain encouraging as imports are likely to remain costlier on account of anti-dumping duty and weaker domestic currency.
•  Going forward for FY21, we expect the share of PVC and C-PVC in overall revenue and EBIT to improve further on account of higher volumes coupled with better realizations.