DMCC Speciality Chemicals Ltd

Building a Stronger

Tomorrow Together

Dear Shareholders,

As we reflect on the past year at DMCC, we are filled with gratitude and a renewed sense of purpose. The challenges we have faced have been significant, and while our performance may not have reached the heights we aimed for, the dedication and perseverance of our team have been truly commendable.

The chemical industry has undergone a period of intense volatility and uncertainty. Economic fluctuations, geopolitical tensions, and shifting market demands have tested our resilience. Despite these hurdles, we have maintained our commitment to our core values and strategic objectives. Our ability to navigate through such turbulent times is a testament to our collective strength and unwavering resolve.

Our Commitment to Sustainability

For us, sustainability is more than just a corporate responsibility; it is a core principle that guides our business strategy. We understand that our long-term success is deeply connected to our ability to operate in an environmentally responsible and socially inclusive manner. Over the past year, we have made significant progress on our sustainability journey.

A major milestone was achieving the Responsible Care certification for our Dahej site, highlighting our dedication to environmental stewardship and safety. We have implemented numerous initiatives to reduce our carbon footprint, manage water and waste responsibly, and increase the use of renewable energy sources. Our Waste Heat Recovery power plant, operational since August, marks a significant step towards energy self-sufficiency, reducing our dependence on the grid and advancing our sustainability goals.

Our commitment to sustainability also encompasses social and governance dimensions. Through various Corporate Social Responsibility (CSR) initiatives, we strive to promote coexistence, support education, and provide healthcare services. Our "Sah-Jeevan" programme provides relief for injuries and livestock losses due to wildlife, while the "Prahari" initiative creates an anti-poaching network involving community and forest department members.

Empowering Our People

We are committed to creating an inclusive work environment that fosters professional growth, innovation, and collaboration. Our workforce has been crucial in overcoming challenges, and we invest in their development and well-being. We encourage employees to continuously upgrade their skills through comprehensive training programs and continuing education, both external and internal. Employees opting for executive education courses receive full support from the company. Safety is paramount at DMCC. We conduct regular safety training, celebrate Safety Week, and hold mock emergency drills. We also prioritise community health by sponsoring programs such as blood donation camps, eye testing camps, Pulse Polio Abhiyan, and medical tests.

"Our commitment to innovation extends beyond product development to include process innovations that enhance efficiency and cost control. We have invested in state-of-the-art production facilities and advanced research initiatives to refine our manufacturing processes. By focusing on process innovation, we ensure we maintain our leadership as cost-effective manufacturers, delivering high-quality products while optimising operational efficiencies and controlling costs."

Regular medical tests are conducted for all personnel, and a doctor is available at our plant daily. An ambulance is on standby 24?7 for emergencies within the factory or the community.

Driving Innovation & Growth

Innovation and research are the cornerstones of our success at DMCC. Our strong innovation pipeline has positioned us on the brink of commercialising several new products within the speciality chemicals domain. Our focus on research and development has enabled us to stay ahead of industry trends and deliver tailored solutions to our customers. Boron chemistry has been a key area of focus. We have increased production capacities to meet future demand and undertaken a strategic capital expenditure initiative to establish backward integration for our Boric acid facility. This has strengthened our competitive position and prepared us for growth as market conditions improve.

Our commitment to innovation extends beyond product development to include process innovations that enhance efficiency and cost control. We have invested in state-of-the-art production facilities and advanced research initiatives to refine our manufacturing processes. By focusing on process innovation, we ensure we maintain our leadership as cost-effective manufacturers, delivering high-quality products while optimising operational efficiencies and controlling costs. These efforts lay a strong foundation for sustained growth and position us to continue providing exceptional value to our customers.

Engaging with Our Community

Our commitment to sustainability and social responsibility extends to our community engagement efforts. We believe that businesses have a duty to contribute positively to the communities they operate in. Over the past year, we have undertaken numerous initiatives to improve the quality of life for our community members. Our CSR initiatives have focused on promoting education, healthcare, and environmental conservation. We have supported educational programmes that explore biodiversity in the Ratnagiri District and provided nutritional support, physiotherapy, and vocational training for children and adults with disabilities. Additionally, we have organised medical camps to offer healthcare services to underserved communities, including gynaecological check-ups and Ayurvedic treatments.

Strategically Positioned for Success

As we look into the future, we are optimistic about the opportunities that lie ahead. While the chemical industry continues to face complex challenges, we are confident in our strategic positioning and our ability to adapt. Our efforts to expand production capabilities, streamline operations, and invest in innovation have set the stage for robust growth and increased profitability.

Over the past years, the industry has navigated through turbulent times. At DMCC, we have been proactive in fortifying our business model, enhancing our sustainability practices, and fostering a culture that values resilience and forward-thinking. We are beginning to see positive shifts in the market, and as conditions improve, we are ready to leverage our strengthened infrastructure and comprehensive product offerings to achieve robust financial results.

From the Managing Director's Desk

Navigating Forward with Grit and Intent

Dear Shareholders,

Warm greetings to you all on behalf of the Board of Directors and the entire team at DMCC. As I reflect on the past year, I am pleased to share our journey, achievements, and strategic vision for the future amidst a challenging operating environment. Despite the myriad challenges posed by the global economic landscape, we have navigated these turbulent waters with a steadfast focus on our strategic goals and a relentless pursuit of innovation and sustainability.

Navigating a Challenging Landscape

The past year was marked by significant challenges in the chemical industry, driven by economic headwinds, geopolitical tensions, and fluctuating demand patterns across key markets. The industry has faced hurdles, particularly with declining demand from primary markets in Europe and the United States, which have been grappling with high interest rates and sluggish end-user demand. This has led to a sustained destocking phase observed at the customer level over the past two years, resulting in low inventory levels and prevailing uncertainty within the market. Despite these challenges, we have remained agile and proactive, leveraging our deep industry expertise and robust operational capabilities to navigate these headwinds effectively.

A Financial Perspective

Despite these challenges, DMCC has demonstrated resilience and adaptability. Our financial performance for the year ended March 31, 2024, reflects our strategic efforts to navigate through turbulent times. The consolidated revenue for FY24 stood at 327.95 crores, a decrease of 15.18% compared to the previous year. However, our consolidated EBITDA including other income was 46.72 crores, an increase of 20.47% year-on-year, and the consolidated profit after tax for FY24 was 11.59 crores. While these figures show improvement compared to the previous year, it is important to note that the last year was exceptionally challenging, and our performance, though better, still reflects the tough market conditions.

Navigating Volatility with Operational Excellence

Our bulk chemicals segment, which contributed 50% to our revenue in FY24, maintained optimal capacity utilisation throughout the year. This segment encompasses high-volume, low-margin products such as sulphuric acid, oleum, and chloro sulphonic acid, which find applications in detergents, dyes, and fertilisers amongst other industries.

While we operated at high capacity utilisation levels, the margins within this segment were compressed due to unfavourable pricing dynamics. As a commodity-driven business, fluctuations in financial performance are an inherent characteristic of this vertical. Our focus remains on maintaining high capacity utilisation and running efficient operations to mitigate margin pressures.

Despite the new capacity running at optimal levels, the realisation for products like sulphuric acid has been lower. Consequently, the increased volumes have not translated proportionately into topline growth for the Company's consolidated financials. However, it's worth noting that raw material costs have also reduced during this period. Even in these challenging times, we have managed to improve our gross margin, which partially offsets the impact of lower realisations. Nonetheless, since this vertical contributed nearly half of our revenue for FY24 and operated at suboptimal margins, its contribution to the overall profitability of the business was limited.

Navigating Headwinds with Strategic Resilience

The speciality chemicals vertical, also contributing 50% to our revenue, faced significant headwinds over the past two years. As these chemicals are primarily exported to major economies grappling with economic challenges, the demand offtake has been subdued. Furthermore, the low demand has resulted in lower capacity utilisation, leading to an inadequate absorption of fixed overheads and suboptimal margins for this business vertical. However, towards the end of the year, we witnessed green shoots of recovery, with demand from certain industries reviving and the destocking phase coming to an end as inventory levels across the value chain reached historically low levels. This vertical is poised to drive the profitability of our overall business. While its performance was not up to the mark due to the aforementioned reasons, its contribution to the overall profitability was relatively low. Nevertheless, we are confident that our strategic investments will enable us to swiftly ramp up capacity utilisation as the demand scenario normalises, propelling our profit growth.

"Sustainability remains a cornerstone of our operations. As our Roha site was already certified under Responsible Care programme, and during the year, our Dahej site received the Responsible Care certification, highlighting our commitment to environmental stewardship and safety. We have implemented various initiatives to reduce our carbon footprint, manage water and waste responsibly, and promote the use of renewable energy sources."

Strategic Focus and Backward Integration

Our Boron chemistry segment has gained significant traction, and we have ramped up production capacities to cater to future demand. During the year, we undertook a strategic capex initiative to establish backward integration for our Boric acid facility, further strengthening our competitive position in this segment.

We have been actively exploring further debottlenecking opportunities in this segment to enhance our production capabilities. The strategic focus on Boron chemistry positions us well for growth as market conditions improve, and we are optimistic about the future potential of this segment.

Commitment to Sustainability

Sustainability remains a cornerstone of our operations. As our Roha site was already certified under Responsible Care programme, and during the year, our Dahej site received the Responsible Care certification, highlighting our commitment to environmental stewardship and safety. We have implemented various initiatives to reduce our carbon footprint, manage water and waste responsibly, and promote the use of renewable energy sources. Our sustainability initiatives are not just limited to environmental aspects but also encompass social and governance dimensions, ensuring a holistic approach to sustainable development. Our CSR initiatives included promoting coexistence by mitigating human-wildlife conflict, supporting education, and providing healthcare services.

Building a Stronger Future

As we look ahead, we are cautiously optimistic about the future. While the current market conditions are expected to persist in the short term, we are strategically positioned to seize emerging opportunities.

Our enhanced capacities, streamlined cost structures, committed team, and upcoming product launches have positioned us to drive growth and profitability as market circumstances improve. The past few years have been extremely challenging for the entire chemical industry. However, at DMCC, we have taken proactive steps to strengthen our business, invest in capacity building, enhance sustainability practices, and foster a culture of innovation and resilience. We have already started witnessing early signs of recovery in certain sectors, and as the demand environment normalises, we are poised to leverage our enhanced capabilities and diversified product portfolio to drive improved financial performance.

A Path Forward

In conclusion, I would like to express my sincere gratitude to our shareholders, customers, employees, and all other stakeholders for their unwavering support and trust. Together, with our collective resilience and determination, we will emerge stronger and continue to create sustainable value for all. The journey ahead is filled with opportunities, and we are confident that our strategic initiatives, robust operational capabilities, and unwavering commitment to excellence will enable us to navigate the challenges and seize the opportunities that lie ahead. As we move forward, we remain committed to our core values of integrity, innovation, and sustainability, and we look forward to continuing our journey of growth and success with your continued support.