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Informist, Tuesday, Oct. 22, 2024

By Aman Aryan

MUMBAI – Plastic manufacturing and processing company Supreme Industries Ltd. felt the impact of "extremely" volatile polyvinyl chloride resin prices, an extended monsoon, and low government expenditure on infrastructure, as the company's consolidated net profit for the September quarter fell 15% on year, missing the consensus estimate by a wide margin. While analysts had expected Supreme Industries to post volume-driven revenue growth, the company's consolidated revenue fell on year, the first on-year contraction in the last 17 quarters.

The company's consolidated net profit fell to INR 2.07 billion from INR 2.43 billion in the year-ago quarter, the steepest fall in the last seven quarters. Although Supreme Industries' volume rose marginally to 138,077 tonnes from 137,763 tonnes a year ago, the company's consolidated revenue fell 1.6% on year to INR 22.73 billion. The average of the analysts' estimates had pegged growth in the consolidated revenue at 7.3%, with only a 1.9% drop in the consolidated net profit. Sequentially, the company's consolidated net profit was down 24% and revenue was 14% lower.

The company also reported a fall of about 9% in its consolidated operating profit for the quarter, with a drop of 121 basis points in the consolidated operating profit margin. Supreme Industries' consolidated operating profit was INR 3.5 billion for the September quarter and its consolidated operating profit margin was 15.17%. As of Sept. 30, the company's total cash surplus was INR 6.74 billion, against INR 11.78 billion at the end of the previous financial year.

The company said polyvinyl chloride resin prices fell 17.5% between Jul. 1 and Aug. 16 as freight rates declined after a steep increase in the previous quarter due to blockage of shipments in the Red Sea. About 66% of the demand for resin in India is met from imports, the company said, adding that the price volatility and subdued demand for agricultural pipes due to an extended monsoon affected the plastic pipe systems business. Supreme Industries said the volatile prices led to deep de-stocking in the entire trade channel.

Although the company expects polyvinyl chloride prices to sustain or rise marginally, it has revised its guidance for volume growth in plastic pipe systems for the current financial year to 16-18% from 25%. The company said it expects the demand to pick up as the monsoon has withdrawn, and the government has announced higher infrastructure spending during Oct-Mar. The company added that it was fully geared to meet the higher demand for its products owing to ongoing brownfield expansion at multiple locations.

Supreme Industries started commercial production at its new greenfield industrial and ball valves unit in Malanpur, Madhya Pradesh, from Sept. 1, the company said. The total installed capacity of the piping systems business, after taking all the expansion plans into consideration, is likely to be 835,000 tonnes per annum by the end of FY25, the company said.

The company's board has approved an interim dividend of INR 10 per share for FY25, with Oct. 30 as the record date. The face value of each share is INR 2.

Among segments, revenue from plastic piping products fell to INR 14.38 billion in the September quarter from INR 15.09 billion a year ago and the revenue from consumer products fell marginally to INR 1.04 billion from INR 1.05 billion a year ago. However, the revenue from industrial products rose to INR 3.28 billion from INR 3.26 billion a year ago and the revenue from packaging products segment rose to INR 4.00 billion from INR 3.52 billion a year ago. 

The company said it sold 138,077 tonnes of plastic goods in the latest quarter for a net turnover of INR 22.36 billion, down from the turnover of INR 22.74 billion in the year-ago quarter. While Supreme Industries' volumes rose 0.2% on year, it fell 20.6% sequentially and product value fell by 1.7% on year in the latest quarter. The company said the overall turnover of its value-added products fell to INR 9.07 billion in the latest quarter from INR 9.42 billion in the year-ago quarter. 

Weaker performance of the plastic piping products segment affected the total revenue as the segment accounts for a major share of the company's revenue. About 63% of the total consolidated revenue came from the plastic piping products segment in the latest quarter. Supreme Industries said its plastic piping products' volume fell to 102,238 tonnes in the latest quarter from 102,929 tonnes in the year-ago quarter and the earnings before interest and tax for the segment fell to INR 1.5 billion from INR 2.01 billion a year ago.

The company said cross laminated film's volume is expected to grow 15% during the year on improved profitability. The company said trials have commenced for the newly developed cross plastic film and the commercial launch of the product is expected by December. The company said it has placed equipment orders and has also awarded civil construction work for making windows at its new site at Kanpur Dehat, Uttar Pradesh. The company expects to launch and supply windows in the first half of FY26. Supreme Industries said it plans capital expenditure including carry-forward commitments of around INR 15 billion. Total cash outflow during the current year is unlikely to exceed INR 10 billion and will be funded entirely from internal accruals, Supreme Industries said.

The company's consolidated net profit for Apr-Sept was INR 4.80 billion, up 4.6% from INR 4.59 billion a year ago. The consolidated revenue for the six months was INR 49.09 billion, up 5% from INR 46.77 billion a year ago. On the National Stock Exchange, shares of the company closed almost 10% lower at INR 4,485.90 Tuesday.  End

Edited by Ashish Shirke

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