Capitaline

Analyst Meet / AGM 26-Oct-19

Conference Call

Supreme Industries

Upgrades capex program to Rs 400 crore

Supreme Industries conducted conference call to discuss the financial results and performance of the company for the quarter ended September 2019. Mr. M. P. Taparia- Managing Director and Mr. P.C. Somani- Chief Financial Officer (CFO) of the company addressed the Concall.
Highlights of the Concall

The company sold 93500 tonne of plastic goods against sales of 83175 tonne of plastic goods achieving volume and product value growth of about 12% and 2%, respectively.

The overall turnover of value added products increase to Rs. 491 crore during the current quarter as compared to Rs. 430 crore in the corresponding period of previous year achieving growth of 14%

The company sold 206928 tonne of plastic goods during the 1st half year of the current year against sales of 183080 tonne in the corresponding half-year of previous year achieving volume and product value growth of about 13% and 5%, respectively.

Plastic Piping System saw a volume growth of 20% to 67812 tonne and value growth of 19% to Rs 812 crore in Q2FY20 with OPM up 340 bps at 11.3%

Industrial products saw a volume de-growth of 13% to 9953 tonne and value de-growth of 33% to Rs 169 crore in Q2FY20 with OPM down 730 bps at 3.8%

Packaging products saw a volume growth of 6% to 11062 tonne and value de-growth of 5% to Rs 198 crore in Q2FY20 with OPM down 1160 bps at 7.1%

Consumer products saw a volume growth of 0.4% to 4673 tonne and value de-growth of 9% to Rs 86 crore in Q2FY20 with OPM up 50 bps at 17%.

During the 2nd quarter, The Company has provided for Rs. 9.70 crore towards quality settlement claim pertaining to supply of Composite LPG Cylinders to Bangladesh and Rs. 4.04 crore towards Provision for doubtful debts against receivables of Rs. 8.08 crore from one of industrial component division customer as the Company has moved to NCLT for recovery of it's dues.

The company could overcome the quality issue of composite cylinder. The product is now well accepted in international market. The company is supplying the cylinders to several international markets.

The demand for the pipe system remained robust. The demand in current month in agricultural segment was crippled due to extended rainy season in several states. It is expected that going forward the demand will broaden for all its systems in the country.

Encouraged by the growth outlook The company has increased its investment plan in plastics pipe system in the current year. It is now going to be in excess of Rs. 250 crore which will include putting up a new plant in Odisha and to start Polyolefin pipe fittings and Pex Pipe Systems at Jadcherla.

Expanded capacity of performance packaging film has smoothly gone into production. The company made a breakthrough in several international markets for this product with newer structures for various applications.

The capacity to manufacture Furniture items at Jalcherla is now well established. The demand is slow but with launch of new varieties of products, it is expected that demand will absorb the increased capacity by next year.

The demand for industrial components and protective packaging products remained subdued. The raw material prices remain on bearish path. It is forecasted that the prices have reached close to the bottom. The low polymer prices were partly responsible for lower value growth compare to volume growth.

For the full year, the company expects volume growth to be between 10 to 12%. The Value growth will be lower than volume in this year.

Average borrowings of the company for the half year ended 30th September, 2019 was Rs. 204.54 crore as against Rs. 223.15 crore for the corresponding period of previous year. Average cost of borrowings as on 30th September,2019 is at 5.89 % p.a. as compared to 8.23% p.a. as on 31st March, 2019.

The company has upgraded its capex program from earlier Rs 350 crore to Rs 400 crore adding about 73000 tonne in piping system, 5000 tonne in industrial system and 3000 tonne in consumer segment

Total pipe capacity stands at 605000 tonne including 418000 tonne in piping system, 73000 tonne in industrial segment, 33000 in consumer segment and 80000 tonne in packaging system.

The company expects Ebitda margin of 13-14% in FY20

The company has opted for lower tax rate regime as a result effective tax rates would be 25.17% in FY20.

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