Supreme Industries conducted conference call on 24 January 2023 to discuss the financial results and performance of the company for the quarter ended Dec'22. 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 138362 tonne of plastic goods and achieved net product turnover of Rs. 2284 crore during Q3FY23 against sale of 91364 tonne and net product turnover of Rs.1895 crore in the corresponding quarter of previous year resulting in volume growth of about 51% and product value growth of about 21%.

• The overall turnover of value added products increase to Rs. 826 crore during the current quarter as compared to Rs. 665 crore in the corresponding period of previous year achieving growth of 24%.

• The company has cash surplus of Rs. 687 crore as on 31st December, 2022 as against cash surplus of Rs. 518 crore as on 31st March, 2022.

• Plastic pipe system business grew by 82% in volume and 31% in value term. Packaging Products segment business grew by 21% in volume and 7% in value term. Industry Products segment business grew by 20% in volume and 24% in value term. Animal product segment business grew by 5% in volume and 9% in value term.

• Plastics pipe system business profitability continued to be impacted due to falling PVC prices till November, 2022. December onwards, PVC prices have started upward march. The low prices of PVC along with re-stocking by the retail chain improved business substantially in December. Pipe system prices, in spite of increase in PVC prices remain affordable. Demand from housing, agriculture and infrastructure is quite improving.

• The company has achieved 51% volume growth in third quarter on a lower base of corresponding quarter in the previous year, as huge de-stocking took place in that quarter. For nine month period ended December 2022, Piping business has witnessed volume growth of 48% which is very encouraging. PVC resin prices which have dropped by Rs. 66 per kg i.e 45% since April of this year till November have recovered again by Rs. 15 per kg since then. It looks that prices of PVC would remain range bound which augurs well for the business. The company expects to maintain the growth momentum, with increased range of system which are commissioned in this year along with affordable raw material prices.

• New greenfield project for plastic piping system at Erode in Tamilnadu has commenced commercial production from December and with some delay, upcoming facility at Cuttack in Odisha has also gone into production in this month. All brown field expansion of capacities and range of products are working smoothly. The company's newly introduced Olefins fittings and PEX piping system are getting encouraging response from market and poised for good growth in time to come. The company has launched cable shield conduit system in this month. With all above projects and expansion in place, the company expects to achieve volume growth in excess of 35% in this segment for this year compared to previous year.

• The cross laminated film division has introduced many new made up products and was successful in acquiring customers by entering in additional countries. The division expects volumes to be around the same level of previous year with improved profitability.

• Industrial component division is doing reasonably well. The division continues to expand its customer base to optimally use its production capacities. Business of home appliances and white goods which constitutes larger share of this division is seasonal in nature to some extent and is likely to improve further with diversified customer base and acquisition of new businesses. The division has also received letter of intent about Rs. 45 crores for supply of electronic voting unit components and VVPAT in addition to the earlier order of Rs. 76 crore.

• Material handling division continues to expand its customer base and product portfolio. Business of injection and roto moulded pallets is doing well. There is good demand forecast from soft drink bottlers which would further help the division to optimally use its production capacities.

• The furniture division has done well during the first nine months of the year, where it's turnover has grown by 13% in value and 8% in volume over corresponding period of previous year. This division has also witnessed steep fall in polymer prices leading to improved operating margin. The company's focus is to add further several varieties of premium products in this business.

• In Composite LPG cylinder division, existing production line is running at full capacity and primarily catering to the order received from Indian Oil Corporation. Commissioning of the new line doubling the capacity is completed and the same is under trial runs now.

• Protective packaging division is putting its continuous efforts to remain in business growth path. All products across categories in the division assert quality and value for money. Division is closely working with customer/end users and developing new applications for varied industries keeping their need in mind. Division is focused to grow in Volume, do value engineering and adopting new technologies in manufacturing to drive improved profitability. Continuous growth is witnessed in defence, export and insulation business.

• Performance packaging film division is working extensively on developing special structure films to meet newer applications and customer requirements. Efforts continues to enter new territories in export market and increase the customer base which is proving fruitful with better realization and profitability. The division is also exploring expansion opportunities.

• The company's capex plan for the year 2022-23 of about Rs. 700 crore including carry forward commitment of Rs. 280 crore is progressing with a little delay from the envisaged schedule. New greenfield plants Guwahati(Assam) and Erode (Tamil Nadu) have gone into commercial production and plant at Cuttack (Odisha) is likely to commence production in February 2023. Entire capex is being funded from internal accruals.

• The prices of various polymers being used by the company particularly polypropylene (PP), low denier polyethylene (LDPE) and poly vinyl chloride (PVC) have witnessed upward trend in recent past after reaching to bottom during the current year. Prices have gone down between Rs. 41/- per kg to Rs. 66/- per kg since beginning of the year till November i.e. a reduction between 28% to 46% before rising a bit during December & January till now. Most severe fall was in PVC resin which also resulted in substantial inventory losses part of which is recovered during December and expected further recover in last quarter of the current year. The company is hopeful of achieving good business growth both in Volume and value for the year.

• Total capacity at the begining of the year was 725000 tonne which the company targets to be around 815000 tonne by end of FY2023.

• CPVC volume growth was 32% in 9MFY23 compared to 9MFY22

• The company expect volume growth of 25% in FY23 with OPM of 12.5% plus and revenue of Rs 9000 crore plus.