Supreme Industries conducted conference call on 30 October 2023 to discuss the financial results and performance of the company for the quarter ended September’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 137763 tonne of plastic goods and achieved net product turnover of Rs 2274 crore during Q2FY24 against sale of 111803 tonne and net product turnover of Rs 2047 crore in the corresponding quarter of previous year, achieving volume and product value growth of about 23% and 11% respectively.

• The company sold 286307 tonne of plastic goods and achieved net product turnover of Rs 4614 crore during H1FY24 against sale of 220725 tonne and net product turnover of Rs 4216 crore in the corresponding quarter of previous year, achieving volume and product value growth of about 30% and 9% respectively.

• Plastic pricing system business grew 30% by volume and 17% in value term on a YoY basis in Q2FY24. Packaging Product segment business grew by 12% in volume and 7% in value term. Industrial Products segment business grew by 4% in volume and degrew by 3% in value terms. Consumer product segment business remain at same level by volume and degrew 6% in value term.

• The overall turnover of value-added product remains at Rs 942 crore during the current quarter as compared to Rs 798 crore in the corresponding period of previous year.

• The company has total cash surplus of Rs 583 crore as on September 30, 2023 as against cash surplus of Rs 738 crore as on March 31,2023.

• Polymer prices remained range bound during the quarter but witnessed a sharp downward trend during 1st fortnight of October affecting business sentiments. Now the prices have started stabilizing and business activities have started picking up.

• The company has acquired the pipe manufacturing unit of M/s Parvati Agro Plast situated at Sangli (Maharashtra) on a going concern basis w.e.f. 17th October 2023 at an aggregate consideration of Rs.151.38 crore. This unit has total installed capacities of 36,000 tonne per annum comprising of 15,000 tonne of PVC Pipes, 18,000 tonne of HDPE Pipes and 3,000 tonne of O-PVC pipes and spread over 13.48 acres of land. O-PVC pipe has good market potential and the company is working to expand O-PVC capacities to 15,000 tonne per annum at Sangli. The company has also signed an agreement to purchase adjoining land admeasuring 7.76 acre from the family which would enable the company to expand its operations at the same site.

• Various capacity expansion programs of piping division are progressing smoothly. Construction work is at full swing at all the sites, namely Kanpur Dehat (U.P.), Erode (Tamilnadu) and Malanpur (M.P.). Orders for equipment have been placed and increased capacities will be in operation during 4th quarter of the current year one after the other. Construction work for expansion at Gadegaon (Maharashtra) is completed and the arrival of production equipment has started. The newly launched PE/AL/PE piping system and electrical conduit system has received an encouraging response. Expanded capacity of bath fittings along with environment friendly surface coating process for enhanced durability & better aesthetics at Puducherry is in place and fully operational.

• The company plans to put up a manufacturing facility to make PVC window & doors is taking shape and effective execution of the same would start by end of November 2023. It is expected to take about 10 to 12 months to commence production trials. The company continues to commit to new investment to increase the range of value-added products and enlarging the product basket in its piping business. With completion of all the expansion plans undertaken, installed capacities of the piping system division shall reach to 7,80,000 tonne per annum by end of FY24 from 6,00,000 tonne as on 31st March,2023.

• The company strategy to focus more on made-up products is yielding positive results. Overall realizations have also improved, and the company has been able to handle the spurious competition effectively. Work on the plan to set up 2500 yonne per annum plant to manufacture newly developed cross plastic film is progressing well. The company expects to launch the same during the 4th quarter of the current year.

• The company has introduced new variants in its cabinet range in its moulded furniture segment and received a good response from the market. The division is continuously adding showrooms to improve awareness of its range of premium products. Total strength of such showrooms has reached 283 by end of September,2023 from 244 showrooms as on 31st March,2023.

• Industrial Component Division has witnessed slackness in demand during the quarter. Although auto sector is doing good but with more dependency on appliances and white goods, overall market scenario does not look to be so encouraging. However, company expects better prospects with impending festive season.

• The fisheries and F&V sectors in the material handling division are seeing good demand and are expected to grow in double digit in volume for the year. There is good demand from the soft drink industry for ensuing summer season. Sales of newly introduced dustbins are encouraging, and the division should continue its momentum of growth both in volume and value terms.

• For composite LPG cylinders, execution of old order received from Indian Oil corporation is taking place and shall be completed during the year. There are no new orders from domestic oil marketing companies. There are serious enquiries from overseas and once converted successfully would yield better capacity utilization of its plant after recent expansion.

• The protective packaging division has enhanced its capacity utilization and the strategy to work more on fabricated products has also improved profitability. The division has acquired prestigious orders/customers and is working on expanding certain capacities to meet the customized demand. The division has also made inroads in the export market and strengthened its distribution network for the same.

• The performance packaging division continues to utilize its capacities optimally and work on post extrusion value added products. The division is also exploring further export opportunities for improved profitability.

• With increased business opportunities, Capex plan of the company is also increasing. Total commitments including carry forward commitments of previous year may reach to about Rs.900 crore excluding the amounts committed for acquisition of business of Parvati Agro Plast. However, total cash outflow is not likely to exceed Rs.800 crore and the same shall be entirely funded from internal accruals.

• The company expects overall volume growth of 23% in FY24 and for plastic piping it expects 28%. It expects overall margin to be around 14.5% in FY24.