Supreme Industries conducted conference call on 28 April 2023 to discuss the financial results and performance of the company for the quarter ended Mar'23. 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 147414 tonne of plastic goods and achieved net product turnover of Rs. 2566 crore during Q4FY23 against sales of 128607 tonne of plastic goods and achieved net product turnover of Rs. 2519 crore in the corresponding quarter of previous year achieving volume and product value growth of about 15% and 2%, respectively.

• The company sold 506501 tonne of plastic goods and achieved net product turnover of Rs. 9066 crore during FY23 against sales of 393908 tonne and net product turnover of Rs. 7625 crore in the previous year achieving volume and product value growth of about 29 % and 19 %, respectively.

• Plastic pipe system business grew by 37% in volume and 20% in value terms in FY23. Packaging Products segment business remains at same in volume terms and grew 8% in value term. Industry Products segment business grew by 23% in volume and 31% in value term. Consumer product segment business grew by 5% in volume and 10% in value term.

• The overall turnover of value added products increase to Rs. 3329 crore as compared to Rs. 2911 crore in the previous year achieving growth of 14%.

• The company has total cash surplus of Rs. 738 crore as on 31st March, 2023 as against cash surplus of Rs. 518 crore as on 31st March, 2022.

• The company plans to commit capex of around Rs. 750 crore during the year including carry forward commitments of Rs.153 crore at the beginning of the year. The capex is planned to expand capacities and introduce new range of products across all its segments. The capex plan also includes setting up plant at Malanpur near Gwalior. Entire Capex shall be funded from internal accruals.

• The country could contain inflationary pressure. Agricultural crops were good. Large investments were taking place in infrastructure by Central and State Governments. Forecast about monsoon was good, giving hope to boost agricultural production in the year. Demand for housing was quite robust. Due to weak world economic forecast the commodity prices were on downward path which augured well for boosting growth in our country's economy. Cumulative effect of these developments enable the company to achieve 29% volume growth in the year thus recovering quite a bit of lost businesses in last two years.

• The company achieved volume growth of about 37% in plastic piping system in FY2023 made from different plastic materials. Overall the company sold 3,75,046 tonne of pipe system compared to 2,74,295 tonne in the preceding year. However due to steep reduction in PVC resin prices, revenue growth was at about 20% over previous year.

• PVC is the predominant raw material in the company plastic pipe business. During the year 22-23 the prices of PVC were again literally in roller coaster mode for second year in succession. The prices of PVC were in downward trend from 1st April'22 till third week of November'22. Overall prices of PVC went down by Rs. 67/- per kg during that period. This has resulted in large inventory loss. Thereafter from 1st December'22 prices of PVC started increasing till up to January'23 and the rise was close to Rs.15/- per kg. From 14th March'23 onwards the increasing trend in prices of PVC was arrested. Prices are now close to stable at lower level leading to boost in consumption in the Country. The country experienced growth of around 32% in PVC resin consumption as the previous two years' growth was negative.

• The government at the Centre and States have taken several initiatives, like focus on Jal Jeevan Mission, Swatch Bharat Abhiyan, Sanitation, affordable housing, smart cities and many more, which all are boosting demand for plastic piping products. The initiatives are much more pronounced in the past year. The same trend continues from the beginning of this year also.

• The company incurred a Capex of Rs. 398 crore in the year under review in plastic piping division at its various plants to build higher capacities, increased range and commissioning of three Greenfield projects at Guwahati (Assam), Erode (Tamilnadu)and Cuttack (Odisha). All three Greenfield plants have gone into production during the year one after the another.

• The company has successfully launched electrofusion Olefins fittings and compression molded fitting with a portfolio of 179 Nos. The company plans to increase the range substantially and add another 140 new products during the current year.

• The company has produced PE/AL/PE pipe for house service connections. These type of pipes are now part of house connection design approved for “Nal se Jal” scheme. The compression type fittings for these pipes are also developed to offer complete system of Pe/AL/Pe pipes applications.

• The company has started manufacturing piping products at one more plant at South zone at Perundurai, District Erode, in Tamil Nadu since December,2022, in addition to its existing plant at Jadcherla in Telangana, making its' presence stronger in southern India. Erode plant is at a strategic location to service Tamil Nadu, Kerala and part of South Karnataka, cost effectively. The company has taken in hand to double the capacity of PVC Pipes and also start manufacturing DWC pipes and blow moulded water tanks at Erode during this year.

• The business of cross laminated film (XF) & products had a de-growth of 5% in volume terms during FY2023. The company has introduced many new made up products from XF film and was successful in acquiring customers by entering in additional world markets. Exports grew by 12 % over the previous year with presence in 32 countries across the globe.

• The company furniture business grew by 11% in value terms against estimated growth of 3% for plastic furniture industry during 22-23 over previous year. The company could grow more than the industry due to intensive marketing effort, consistent business policies, launching of several new range of furniture, increase in coverage of uncovered markets and strong brand position as a premium brand. The company focus on creating large retail display showroom for plastic furniture was successful.

• 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 company acquired a prestigious order from ECIL for manufacturing EVM and VVPAT related parts and sub-assemblies. All these factors resulted in to revenue growth of nearly 30% YOY over the preceding year.

• The automobile, whitegoods, engineering, FMCG companies enjoying relatively better domestic demands over previous two years led material handling division to grow 16% by volume and 28% value for the year. The company regular pitch, to reach new users of Inj. moulded Pallets, educating them about the features and benefits of the same, providing value enhancing solutions for safe, effective economic material storage and transit has given positive and encouraging results. The company is confident of this growth momentum for the coming year also it continues to strengthen its customer reach and introduce suitable new products in this segment of business.

• FY23 was the most successful year for composite cylinder division with plant running at 90% of its capacity and fulfilled its supply commitments. The company has supplied 4.72 lakh nos cylinders in aggregate till March,23 to IOCL against the LOI for supply of 7.35 Lakhs cylinders. The company expects further orders from IOCL during the year and also continues to expand its geographical reach to other countries. Expansion of existing capacity has been successfully completed and increased capacity of 1 million cylinder per annum is now in place.

• In performance films division, on the positive front changes in product mix and focus on direct sales to brands and value added products which resulted in growth 3% in volume and about 21% in value terms. Division is now registered under EPR (extended producer responsibility) and is supporting government initiatives on sustainability through plastic waste management. The company expects to achieve volume and value growth in this business in the current year due to increase in customer base in India and abroad.

• Protective packaging division is putting its continuous efforts to remain on growth path which resulted in growth 5% in volume and about 11% in value terms. 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.

• The company had inventory gain of about Rs 50-70 crore in Q4FY23. For FY23 it had inventory loss of Rs 180 crore.

• Capacity as on 31st March 2023 is – piping division is at 600000 tonne, Industrial products 84000 tonne, packaging products 90000 tonne and consumer products 29000 tonne. The company expects total capacity to increase from 8 lakh tone to 9.5 lakh tonne by end of FY2024. Capacity at the beginning of FY23 was 725000 tonne.

• Capacity utilization in FY23 was around 66-67%.

• The company expects sales of around Rs 11000 crore in FY24, volume growth of around 15% and margin of around 13.5-14%.