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Informist, Tuesday, Oct. 22, 2024

By Aman Aryan

MUMBAI – After reporting a 0.7% on-year fall in its plastic pipe sales volume in Jul-Sept and a 10% decline in Apr-Sept, Supreme Industries Ltd. expects a higher growth in volume in the second half of the current financial year, Chief Executive Officer M. P. Taparia said in a post-earnings conference call. However, the company Tuesday lowered its volume growth guidance for the plastic pipes business to 16-18% from 25% earlier for 2024-25 (Apr-Mar). To meet the higher end of this new guidance range, the company will have to deliver a substantial growth of 24.2% on year in plastic pipe sales volume in Oct-Mar, calculations by Informist show.

Taparia said the inventory, which was "quite large" by the end of September, and the proposed increase in the capacity will aid the FY25 volume growth guidance. During the September quarter, however, the company saw an inventory loss of INR 350 million-INR 400 million due to de-stocking. Taparia said the channel inventory "must have" normalised in October after a large de-stocking in the September quarter.

The company currently has a capacity to produce 790,000 tonnes of plastic pipes per annum. While the company expects its plastic pipes segment to report earnings before interest, tax, depreciation, and amortisation margin in the range of 14.5-15.25%, its packaging segment is expected to report an EBITDA margin of 16-18% going forward.

Prices of polyvinyl chloride, a key raw material for the company, will likely fall in the second half of the current financial year (Oct-Mar), Taparia said, adding that this will stop the further fall in realisation of plastic goods.

The company reported its consolidated net profit for the September quarter at INR 2.07 billion, down 15% on year. Consolidated revenue of the company was down 1.6% to INR 22.73 billion.

Although the company expects its infrastructure business sales to grow by 10,000 tonnes-12,000 tonnes in Oct-Mar, Taparia said Supreme Industries is a "small player" in the infrastructure sector. However, the company expects its business in the housing and agriculture segment to increase in Oct-Mar as the demand in the agricultural products segment peaks during Nov-May, Taparia said. The company's housing segment is expected to pick up as a "big threshold", such as the monsoon and the festival season are "gone", Taparia said. Although housing is one of the major businesses for the company, it was affected due to de-stocking in the latest quarter, he added.

The company said it has made capital expenditure commitments, including carry forward commitments, of about INR 15 billion for the current financial year, of which more than INR 2.60 billion have been added in the first half. Taparia said this financial year will see the highest capital expenditure by the company.

The company also expects to launch and supply windows in the first half of FY26. "The company has placed equipment orders and also awarded civil construction work for making windows at its new site at Kanpur Dehat in U.P. (Uttar Pradesh)," Taparia said. In the investor call, the company said it will restrict window sales to markets in Uttar Pradesh, Uttarakhand and the National Capital Region, Taparia said, adding that Supreme Industries is a "new entrant" in this market and "wants to learn the business". "There are many players in this and the market (is) may be around 150,000 tonnes and we are putting a capacity of 5,000 tonnes," he said.

The company said it expects demand to improve in the industrial components division. This division is also working to expand its customer base and to develop the business in new sectors, Taparia said. The company's protective packaging division is focussing on developing customised solutions, he said. The division continues to increase its fabrication capacities in various geographies to meet the increased demand.

The company said expansion activities that are undertaken in Telangana, Madhya Pradesh, and West Bengal will be in place in Oct-Mar. The performance packaging division, on the other hand, continues to optimally utilise its capacities and work on improved product mix and post-extrusion value-added products, Taparia said. On the National Stock Exchange, shares of the company closed almost 10% lower at INR 4,485.90 Tuesday.  End

Edited by Tanima Banerjee

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