Capitaline

Analyst Meet / AGM 29-Jul-19

Conference Call

Supreme Industries

Maintains its volume guidance of 8-10% growth

Supreme Industries conducted conference call to discuss the financial results and performance of the company for the quarter ended June 2019. Mr. S. J. Taparia- Executive Director; Mr. P.C. Somani- Chief Financial Officer (CFO); and Mr. R.J. Saboo- AVP (Corporate Affairs) & Company Secretary of the company addressed the Concall.
Highlights of the Concall

The company sold 113428 MT of Plastic goods and achieved net product turnover of Rs. 1418 crore during Q1FY20 against sale of 99905 MT and net product turnover of Rs. 1316 crore in the corresponding quarter of previous year achieving volume & product value growth of about 14 % and 8 % respectively.

The overall turnover of value added products increased to Rs. 457 crore during the current quarter as compared to Rs. 431 crore in the corresponding period of previous year achieving growth of 6%.

Plastic Piping System saw a volume growth of 22% to 85214 tonne and value growth of 20% to Rs 898 crore in Q1FY20 with OPM down 180 bps at 11.3%

Industrial products saw a volume de-growth of 16% to 10369 tonne and value de-growth of 19% to Rs 188 crore in Q1FY20 with OPM down 50 bps at 10.8%

Packaging products saw a volume growth of 1% to 12745 tonne and value de-growth of 5% to Rs 245 crore in Q1FY20 with OPM down 440 bps at 12.4%

Consumer products saw a volume de-growth of 3% to 5100 tonne and value de-growth of 3% to Rs 97 crore in Q1FY20 with OPM up 150 bps at 16.8%

PBDIT margin was down 180 bps to 12.5% in Q1FY20 mainly due to inventory loss led by lower polymer prices and higher demand of agricultural pipes which enjoys lower margin.

The raw material prices of most of the polymers are in a declining trend. The company converts mostly commodity plastics where prices have tendency to remain volatile. This resulted in steep inventory loss in the working of the company for the quarter affecting operating margins adversely. It is expected that due to increased worldwide supply of these polymers, the prices may remain soft and range bound during the year.

The company expects raw material polymer prices to be range bound but at affordable levels.

PVC resin prices hiked during the quarter due to increase in custom duty.

Various initiatives taken by the Central and State Governments such as boosting affordable house construction, establishing sewerage & drainage system, drinking water system are all gathering momentum. Recent announcement by Government to provide drinking water in each home by the year 2024 will boost the requirement of plastic pipe system in large volume augurs well for the company's business.

Jadcherla unit has commenced commercial production and started delivering Roto Moulded Tank and furniture products in the market during the first quarter. The company is doubling the Roto Moulding capacity at Jadcherla and finalizing plan to put up HDPE fittings manufacturing capacity at Jadcherla which may go in production in first half of 2020-21. The company will plan to put up plastic pipe manufacturing capacity at Jadcherla complex where initial steps are being taken. New Production facilities of Protective Packaging division are under construction at Jadcherla.

The company is augmenting capacity of HDPE Pipe capacity and putting up injection moulded fitting manufacturing facility at Kharagpur, PVC pipe capacity at Kanpur and Moulded fitting capacity in Jalgaon unit. Most of the capacities shall go into the production during 3rd/4th quarter of the current year and shall be available for full in FY2020-21 onwards.

The company has maintained its volume guidance of 8-10%, value growth guidance of 12-15% and Ebitda margin of 13.5-14.5% in FY20

Total borrowing of the company stands at Rs. 115 crore as on 30th June 2019 as against Rs. 162 crore as on 31st March, 2019. Average cost of borrowings as on 30th June, 2019 decreased to 6.53% per annum as against 8.23% per annum as on 31st March, 2019.

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