Supreme Industries conducted conference call on 21 July 2021 to discuss the financial results and performance of the company for the quarter ended June'21. Mr. M. P. Taparia- Managing Director, Mr. P.C. Somani- Chief Financial Officer (CFO) and Mr. R.J. Saboo – VP (Corporate Affairs and Company Secretary) of the company addressed the Concall.

Highlights of the Concall

• The company sold 71264 tonne of plastic goods and achieved net product turnover of Rs. 1310 crore during Q1FY22 against sale of 91451 tonne and net product turnover of Rs. 1040 crore in the corresponding quarter of previous year resulting in volume degrowth of about 22% and value growth of about 26%.

• Plastic Piping System degrew 36% in volumes to 4811 tonne and grew by 9% in value terms to Rs 831 crore in Q1FY22. OPM was 20.65% in Q1FY22 compared to 11.71% in Q1FY20.

• The company had some inventory loss in the pipe business. OPM was higher at 21% due to higher sales of value added products, lower sales of agri pipes (low margin) and good growth of CPVC systems. CPVC reported volume growth of 42%. The company expects CPVC volume to grow in double digits for FY22.

• Industrial Products grew 99% in volumes to 9512 tonne and 184% in value terms to Rs 199 crore in Q1FY22. OPM was 10.64% in Q1FY22 compared to 1.39% in Q1FY20

• Packaging Products grew 13% in volumes to 11532 tonne and 30% in value terms to Rs 244 crore in Q1FY22. OPM was 11.87% in Q1FY22 compared to 15.24% in Q1FY20

• Consumer Products grew 40% in volumes to 2109 tonne and 71% in value terms to Rs 48 crore in Q1FY22. OPM was 9.97% in Q1FY22 compared to negative of 2.11% in Q1FY20

• The overall turnover of value added products increase to Rs. 516 crore during the current quarter as compared to Rs. 378 crore in the corresponding period of previous year achieving growth of 37%.

• The company cash surplus has declined to Rs. 381 crore as on 30th June, 2021 as against cash surplus funds of Rs. 759 crore as on 31st March, 2021 led by buildup of inventory and capex.

• The business was severely disrupted due to second wave of Covid-19 during first quarter of the current year. This time, the infection was quite widespread in rural areas. April and May are the peak season for PVC pipe system for agriculture application

• As the rural market was badly affected by the pandemic, the agricultural demand took a big hit resulting in huge volume loss of business in piping segment. The company was thus required to carry forward the pipe inventory which was kept ready to meet large seasonal demand of agricultural pipes. Plastic piping system thus saw a volume de-growth of 36% compared to corresponding quarter in the previous year.

• PVC prices have started going up now, after a drop of Rs. 19/- per kg since April 2021. The demand in construction segment has now opened up. The company expects that the first quarter loss in volume in piping system not only be recovered but will show a growth in full year.

• The upcoming unit to make plastic pipe system at Guwahati will be operational by October 2021. The company has taken in hand to put the plastic product complex in Orissa with an outlay of Rs. 121 crore in the current year. The same may be operational in last quarter of 2021-22.

• Total capex planned for the year has now increased to Rs. 521 crore from earlier Rs. 400 crore including carried forward commitments of previous year.

• For Rs 521 crore of capex around Rs 200 crore will be greenfield expansion and Rs 321 will be brownfield expansion. Normally in a greenfield investment the company get sales of Rs 1.-1.7 rupee per rupee of investment and in brownfield investment around Rs 2 per rupee invested. The comany expects additional sales of Rs 900 crore with this investment and full production will happen next year

• The compression moulded olefin fittings have gone into commercial production at Jadcherla since June to cater to the growing demand in "Nal-se-Jal" Scheme.

• The Second wave of pandemic and the resultant localized lockdown has adversely affected the demand supply chain during the first quarter, which is the peak demand period for Tarpaulins. The sales of cross limited film products were down by 12.52 % in first quarter compared to the corresponding quarter in the previous year. The production has also taken a hit during the first quarter due to scarcity of labour on account of large infection in rural area.

• Exports have gone up by around 50% in the quarter, compared to the first quarter of last year. With the waning of second wave, the labourers are back and the production is running at full capacity. The good run in exports is continuing.

• The furniture business has shown a volume growth of 40% in the quarter compared to previous year similar quarter. The value added products sales have gone up to Rs. 23.26 crore compared to Rs. 13.41 crore in the same quarter of last year. This division is working on digital campaign on several media sites such as facebook, you tube, Instagram for brand promotion. The business expects to have a decent growth in this year over previous year.

• Business scenario remains bullish in industrial component business barring the initial disruption during first quarter. Division is working with its existing customers for new business apart from developing new customers. The company is putting need based capital expenditure to meet increased business requirements.

• Material handling products being intermediary to supply of essential products have done good business both in terms of value and volume. Division is working to introduce various new products/applications from Injection Moulding and Roto Moulding process. Expansion of capacities at its plant at Lalru (Punjab) and Gadegaon (Maharashtra) is nearing completion and shall be operational by July-August,2021.

• In Composite LPG Cylinder division, repeated orders from existing as well as new customers are continuing. Domestic Oil Marketing Companies IOCL and BPCL have also floated enquiries for purchases which augurs well for the long awaited introduction of composite cylinders in the Indian market. Overall business scenario looks encouraging.

• Protective packaging business has shown good improvement over corresponding quarter of previous year. New products for export market have been well received. Its retail division for fitness products is also picking up well. Division is focusing on customized solutions and value addition to its OE customers.

• Beginning of the current year, all the polymer prices have shown softening trend. However, after reduction between 13-16% during the quarter, prices have again started firming up and expected to remain range bound.

• The company is committed to increasingly meet its energy requirements from renewable sources and investing a sum of Rs. 35 crore in the current year to install Roof top solar energy generation plants at its various plant locations. The same shall be operational by October-November, 2021.