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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to The Supreme Industries Limited Q1 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Kashyap Pujara from Axis Capital. Thank you, and over to you, sir.
Thank you, Ravi, and good evening to everyone, and thank you so much for standing by. It's a great pleasure to have with us the management of Supreme Industries to discuss Q1 FY '21 earnings. From the management side, we have Mr. Taparia, who is the Managing Director; Mr. P.C. Somani, who is the CFO; and Mr. R.J. Saboo, who's the Company Secretary. Without taking much time, I hand over the floor to Taparia-ji. Taparia-ji, over to you. And I must congratulate you for a decent set of numbers given the current times that we are in. Over to you, sir.
Thank you very much for your encouraging words. I'm M.P. Taparia, Managing Director of The Supreme Industries Limited. I, along with my colleagues, Shri P.C. Somani, CFO; and Shri R.J. Saboo, Vice President, Corporate Affairs and Company Secretary, welcome all the participants who are participating in the discussion of unaudited standalone and consolidated financial result for the first quarter ended June 30, 2020. The stand-alone results and the consolidated results are already with you. Due to COVID-19 and resultant impact on the business shares, this quarter was abnormal and strictly not comparable with the corresponding quarter of the previous year. However, I will give brief on company's product operating performance and other highlights. The company sold 91,451 ton of plastic goods and achieved net product turnover of INR 1,040 crore during the first quarter of the current year against sale of 113,428 ton and net product turnover of INR 1,418 crore in the corresponding quarter of previous year, achieving volume and product value degrowth of about 19% and 27%, respectively. Total consolidated income and operating profit for the first quarter of the current year amounted to INR 1,054 crores and INR 114 crores as compared to INR 1,437 crores and INR 180 crores for the corresponding quarter of the previous year, recording decrease in consolidated income of about 27% and operating profit about 37%. The consolidated profit before tax and profit after tax for the first quarter of the current year amounted to INR 55 crores and INR 41 crores as compared to INR 127 crores and INR 87 crores for the corresponding quarter of the previous year, recording decrease of 57% and 53% respectively. The total turnover of value-added products remained at INR 378 crores during the current quarter as compared to INR 457 crores in the corresponding period of previous year. Total net borrowing of the company stands at a surplus of INR 31 crores as on June 30, 2020 as against borrowing of INR 217 crores as on March 31, 2020. Average net borrowing level during the current quarter remained at INR 134 crores against INR 169 crores in corresponding quarter in the previous year. Average cost of borrowing as on June 30, 2020 decreased to 7.53% per annum as against 8.35% per annum as on March 31, 2020. The business outlook. Since second half of March 2020, country is fighting against a global pandemic, COVID-19. Country has witnessed series of lockdown initiated throughout the country and unlocking process has begun since June. Although production and dispatches at all the plants of the company have commenced during last week of April, 1st week of May 2020, normalcy of operation and business level is yet to be restored at pre-COVID level. Plants for Piping products, Packaging Film and Cross Laminated Film products and material handling products have seen gradual recovery and by now have reached near to normalcy of operations whereas plants for Furniture and Industrial Components and certain segments of Packaging products are operating between 50 to 70% capacity utilization. Frequent lockdowns in various parts of the country, coupled with exodus of millions of workers to their native place is hampering smoothening of economy revival and severely affecting the construction activities and plant operations in large and Tier 2 cities. Continuance of present status makes it difficult to forecast the annual outlook about the businesses for the year. The promising part in this situation is robust demand from rural area and Tier III & Tier IV cities and towns. Company enjoyed better demand in rural market compared toCorresponding period of previous year for the products which are catered by it to these markets. The harvested Rabi crop was bountiful. The monsoon this year is quite widespread, which augurs well for bumper Kharif crop. Crude oil prices remain range bound at below $45 a barrel. The banks are flush with funds with bias of lowering the rate of interest further. Central and state governments are taking various steps to boost the economy by pushing infrastructure investments. Polymer prices have shown upward trend since second half of May but remain affordable. Company expects that once these widespread localized lockdowns are significantly reduced, the pent up demand will emerge for all the products in the company's portfolio. Envisaging good demand prospect in the year 2021-22, the company has committed and/or to commit an investment of around INR 350 crores in its various existing plants and in putting up new plant to make piping system at Orissa and a cross plastic film plant at a site adjacent to its composite cylinder plant in Gujarat. Company continues to keep tight control on its fixed costs and receivable. This is a brief and overall summary for the first quarter of the year under reference. Thank you for your presence. Now I and my colleagues, Shri P.C. Somani and Shri R.J. Saboo, are available to reply to various queries you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Kishan Gupta from CD Equisearch.
Yes. We want -- you have mentioned in your initial commentary that rural market seems to have done better. So why was it this time?
Sorry?
You mentioned in your commentary that rural markets and Tier 3 and Tier 4 markets did well this time.
That is the fact, I stated factual position. If you want to know why there is better demand or find, one is the Rabi crop was quite bountiful. Secondly, with our interacting with our dealers who are dealing with farmers, we were told that this time, the procurement machinery ran very well in various state governments. And not only the goods are procured in time, but they received payment also in time. So the credit line was well restored for the farmers. And farmers were very desirous to invest money in development work. And fortunately, in the areas where we are operating, the dams were having adequate water. So therefore encouraged them to invest money in putting piping system. As the Rabi crop was very good, so to cover the harvested crop, we sold large volume of covers also, and we sold large quantity of the pond lining material.
And how much was this -- the rural piping volume growth this time?
Rural piping, the limited period, what we sold in April-June, we had around 15% volume growth in rural market.
Compared to the same period last year?
Same period last year.
And what is the revenue -- volume share of this thing, the rural, out of the 75,000?
I don't have the numbers. But I can say in our Piping business, major business came from rural area only because housing was in low key.
And what sort of integration do you have across your different business segments?
What do you say mean? What?
What sort of integration is there between your different segments, Plastic, Industrials, Packaging and Consumer?
Integration, I don't understand what you mean. Piping system is -- I thought in plastic piping system. So how pipe system integrates into industrial component?
Yes. So is there any sort of integration between your business -- in terms of sharing the common resources, et cetera. So what sort of integration is there?
We have separate distributor for different products. And industry component, in any event, we are selling directly to the maker of the industrial product, like refrigerator, air conditioner, we sell to them directly. There's no distributor network. The distributors who are selling my pond lining material for food storage cover, they are different than piping distributor. We don't have common distributor for the product.
Just let me tell you one thing. Although we don't have an integration on the output level, the products are different, the users are different, but at the procurement level, at the manufacturing level, we definitely have because ultimately, we are using plastic. We only procure plastic raw material from domestic suppliers, overseas suppliers, procuring the all kind of polymers, which are used in the different products. We have multiproducts manufacturing plant where we have multiple product division. The common resources are effectively utilized. So on the production and procurement level, definitely, yes, we have the benefits of economies.
The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Yes. Congratulations for a good set of numbers. Sir, just wanted to know that we've seen almost 30% growth in the Silpaulin business in this particular quarter. So what in particular has helped us report such higher growth? And what would be the pricing and margin outlook for this business, given that we were seeing some tough times last year? Is it fair to say those tough times are now sort of behind us?
No, we have not dropped the price. Actually, the polymer price has gone up. So we have made 3% price increase also. And in our cross-laminated film product, we have increased the price.
Okay. And have you seen any market share gain given such a strong growth in this business in this quarter?
I believe our market share must have gone up because we had more than 20% volume growth.
Okay.
In this product portfolio in the quarter.
And is it fair to say that during July to September also, we should see some traction in this business given that the season might have got extended this time around?
No, season gets extension like that, July, definitely kind of is a growth, but August, till now they are the lean season. Now when we will open our lean season business that we will decide in the month of September.
And in terms of...
Sorry, 20% plus growth, which I told about cross-laminated film, that was the figure of June only here. Overall, April to June, we have increased the business, but I gave the number only of June.
Okay. Secondly, sir, if you look at the incremental gross block turnover from FY '15 to '20, it has sort of reduced as compared to what we see during FY '10 to '15. So what are we sort of planning to sort of increase or sorting of these assets because in the last 5 years, sort of asset turns have sort of come off. So what are we planning to sort of ramp this up in the next 3 to 4 years?
Sorry, I didn't follow your question, I didn't follow it.
Bhargav, can you repeat, what you are...
Basically, like he is talking about asset turnover, basically?
Asset turnover, yes, we are aware that now it has come down below INR 2 per INR 1 invested. We are sealed with the issue.
Sorry, sir. Come again?
We are sealed with the issue. Earlier, we were generating around INR 2 or slightly higher than INR 2 per INR 1 invested. Now we are seeing this has gone down that in our composite cylinder industrial component, the turnover was a little less, but we are sealed with the issue, and we are directly moving to improve the ratio. But this month -- this year is a tough year.
Sure, sir.
Secondly -- Mr. Bhargav, apart from, you see nowadays when we're putting multiple of complexes, we have to invest a large amount of CapEx into the infrastructure buildup, the construction work, the land, building, et cetera, which does not start giving revenue in terms of investment. So over a period, when we continue to expand brownfield expansion, we conclude there in Phase 1, Phase 2, Phase 3. So over a period of 2, 3 years, that external complex gets ready for proper revenue. Like Kharagpur, like Jadcherla. So those are the units where the large CapEx has been made. The initial investment into land, building, infrastructure is quite large.
Yes, yes.
Yes. And lastly, sir, in terms of new product launches like Biofloc cross plastic film, where are we in terms of new product launches?
We received an encouraging response for all new product, which we will launch from our cross laminate film. So we are constrained of supplying adequate volume. So we have taken on rent some large readymade building and there, the work started from July 1, and we will now have no supply problem in supplying the better product. We have appointed a new dealer network also, and we expect good business coming from all those better products.
The next question is from the line of Sailesh Raja from B&K Securities.
Sir, my questions are pertaining to Supreme Petrochem. Could you please give us this quarter volume numbers for each of the 5 product verticals?
Sorry, say it again?
No, could you please give us this quarter volume numbers for each of the 5 product verticals?
This quarter volume, we had a big degrowth. And polystyrene, in the country, we had a degrowth of 73% by volume. And EPS, the degrowth was 71%. Our degrowth in polystyrene was 66% by volume and 60% by EPS.
Okay. Sir, can you give us the exact volume number, sir?
Sorry? Precise number, I don't have it with me, but it was a year with a tremendous destruction of demand for polystyrene and EPS and also, there was degrowth in all the polymer consumption, there was degrowth in specialty polymer compound also and also in extruded polystyrene foam also, which was going into building activity and building activity is at a very low level. So in all the vertical, there was demand degrowth.
Okay. Sir, when the commercial production of this ABS is expected to start and how much revenue we are targeting in this product over next 2 years?
On ABS, we will have much clear picture by end of this calendar year.
Okay. Okay. What is the total investments you are putting, sir, in this project?
When we come to that, we will inform you. Today, this year, overall, otherwise, we are investing INR 120 crores in Supreme Petrochem and various vertical, where replacing some equipment, which are old equipment, and a little bit keeping up -- some small revamp also. But major investment of ABS, we still have not factored in this year.
Okay. So in the polystyrene, so if you see, the import is less than 40,000 per annum. And definitely, there is undercutting in prices for players. So after this anti-dumping, how much price increase is possible for the organized players like Supreme Petro here?
Let the anti-dumping be a reality because the -- it is coming, Iranian material in United Arab Emirates and from America, from 6 countries. The finding has gone that there's a big antidumping going on. But unless the finance ministry issue a notification based on those findings, it doesn't become effective. So only it becomes effective, then everybody will come to know also.
The next question is from the line of Madhav Marda from Fidelity Investments.
Sir, I just wanted to understand in the piping business, of 3 lakh metric ton volume that we did in, say, last year, what percent of by volume would be agri pipe versus non-agri pipes? Just trying to understand so we can get a better sense of the strong volumes we saw in pipes overall for quarter 1 despite the lockdown?
Precisely, it is not possible to say because we are aware many people use agri pipe for housing also. So we cannot say how much has gone in agri out of the 2 lakh plus ton in the last year.
But how much do we sell maybe in rural areas and Tier 3, Tier 4 versus the larger cities and towns? Would we have a broad idea there?
What did you say?
Volume for the pipes, how much of it goes for Tier 3, Tier 4 and rural areas versus the larger metro cities and towns? Any broad split you have there?
This agri pipe mostly is sold in Tier 3, Tier 4 towns only. Big cities like any metro cities or Tier 2, there is no requirement for agri product.
Exactly. So how much of our volume in pipes overall goes...
We can say only agri business, our business has grown up by 15% by volume out of the degrowth in this quarter. Overall, we had a degrowth of around 11% on Plastic Piping business by volume.
Okay. And the agri side of it grew by 15%?
Agri pipe share growth by 15%, degrowth was more severe in housing.
Understood. Understood. Okay. And sir, if you look at the rest of the year, I don't want a specific number, but could you give some comments because state governments' CapEx on irrigation projects or low-cost housing, et cetera, do you think that could come down? Or do you think the government, we could still see some spending?
Government spending on infrastructure, no change at all.
Yes.
They have not slowed down.
They have not slowed down. Okay.
They are going on.
The next question is from the line of Avi Mehta from IIFL.
Yes. Sir, I had -- just following up on the question that was asked by the earlier participant. Sir, will the rural share as we kind of come off in the future quarters, would it be -- would you see sales kind of coming under pressure? Or this strength that we saw is something that you're expecting to continue or any trends? Because I still don't see the volume guidance that you typically give. If you could share your thoughts on that, sir.
No, rural demand is always very lukewarm in July, September.
Okay.
The farmers are busy in sowing the field. There's no money spent on new development. And whatever money they -- whatever they bought to cover the crops that are happening April-June. July-September, there is nothing to cover also. So rural demand always remains lukewarm in July-September.
Okay. And then the share comes down logically, right, as we go forward in the future quarters?
From July to September, July to September is a lean period for the company. But our demand comes from housing and infrastructure in piping.
Okay. And sir, how is the situation there? If you could give us a sense. Basically, I'm trying to...
Actually things are looking not -- anything great about as on today due to so many lockdowns at local level and due to migrant workers not available at construction activities. So housing activity in Tier 2 and metro town -- metro cities are quite low. Whatever housing activity where we are selling is in rural area and Tier 4 and Tier 3 towns.
Okay. And so sir, July, that is what we would have sold. Is that a fair understanding, sir? Or that is how it would have been? And the plant utilizations are kind of factoring in that, right, sir?
Generally July-September is a lean quarter for our company, this is different category of product what we are having. To analyze our balance sheet, yes, they are lean quarters.
Okay, sir. I understand that. Okay. And sir, secondly, on the -- so this -- the clarification that I wanted to kind of take was the utilization level was the number as on end of the quarter, right, sir? I mean -- or is that on July? What is the -- because you shared utilization of pipes is almost at maximum...
But for this month, we are running. Overall, it's 70%, but some business are lower than 70%. And some are higher than 70%. So I just told today also on television.
Yes, yes, sir. No, no, sir, that was for July, right? Sir, I just wanted to clarify that one.
Yes, yes.
Okay. And sir, last bit was on the packaging side. Now we have seen healthy margin profile playing out in that business for some time. Would you say that now we have done all the corrective action on competition. And now we are in with how -- if you could give us your thoughts on that, sir?
In packaging, we have 3 different segments for like our performance packaging film, there we expanded capacity last year, and which was in operation from this year. We had a very decent growth. In the first quarter, we grew by 39%. First quarter -- in the month of June, we grew by around 40%. But there is growth in the first quarter also. Second quarter also, our order books are filling up very nicely. On cross laminate film also, we had a growth in the first quarter, and we expect growth to maintain in the second quarter. Only protective packaging product, we had a degrowth in the first quarter. And in the month of July also, it is not running -- it is lower level than compared to last year. So there's going quite a lot in industrial application. In industrial application and housing activity, both are even now subdued.
The next question is from the line of Nehal Shah from ICICI Securities.
Congratulations on a good set of numbers. Sir, on the Piping margins, can you give us a color as to whether we had inventory loss for the quarter? And if yes, how much?
Sorry, say it again, Nehal-ji.
Sir, inventory loss for the quarter for the Piping system?
Inventory loss, the prices have come down. We did not transfer in our product pricing at that time. So we believed the price fall is very temporary. And our feeling came true, the price had dropped by INR 13.5 a kilo between March 18 to May 1, and then by end of June, they recovered to around INR 12 back. So we didn't drop the price to the extent of price fall, so we did not suffer much inventory loss.
Okay. But it would still be there for the quarter to...
Some loss have to be there because prices are quite high. When we entered into the month of April, we had imported material, it's coming at high cost and price has started dropping from March 18 onwards. And dropped very severely. In 1.5 months, price had dropped by INR 13.5 a kilo. So with such a drop, we don't lose inventory -- there is no [Foreign Language].
Right. And sir, if the prices remain at these levels, probably we might see inventory gains coming in Q2. Is that the right assessment?
Inventory gain for what?
For Q2, sir.
I can't share inventory gain, no? There was no inventory loss in the first quarter and second quarter, there will be no inventory loss. Now we have no inventory loss reason because the previously it was very tight.
Okay. And sir, any sense on margins can you give for the Plastic Piping division for the year? Because I think the Q1, our margins were weak because of higher agri...
We can't give any guidance about the margin, please. This year looks very difficult.
Okay. And sir, can you give the agri mix for the first quarter because the first quarter is highly skewed towards agri? Would it be around 60%, 70% or 50%, 60%?
I don't have the number. But definitely, I can say, housing demand was quite low in the first quarter.
The next question is from the line of Ritesh Shah from Investec Capital.
Congratulations for a good set of numbers. Sir, my first question is on new product launches. Did we have any new launches in the last 3 months? And do you have any plans for new product launches in forthcoming months, please?
We have planned to launch 230 new product in our variety of system -- fitting for various systems, we have 32 systems in plastic piping. In plastic piping, we would plan to launch 230 products this year. 15 products were launched in the first quarter. In Furniture, we have plan to launch more than 12 products. And product industrial molded, millions are rotomolded. So every month, we are launching new product month after month. We are launching a new product in Material Handling division also. Today in Piping also more than 8,500 SKUs are there. And we go on adding SKU every month.
Right. Sir, anything in packaging, specifically on the Biofloc side, you had indicated in the last call that we will be doing our trial launch. Sir, what is the update over there?
Which one?
Sir, Biofloc. In the prior call, you were indicating...
Biofloc, we have introduced in cross laminate film. That was successful. We started commercial marketing.
Okay. And sir, this has been done on a pan-India basis or basically specific southern states where...
We made a soft launch in 4 states.
Okay. Okay. This is helpful. Sir, second thing is, in the initial remarks, you did indicate that we are setting up a plastic film plant at the LPG cylinder plant in Gujarat. So sir, is this some new CapEx? Or how should one look at it? Is this cross-laminated? What is the total CapEx...
It is completely new product. Our company has invested more than $2 million over a period of last 3 years and perfected this technology by a collaboration with a Swiss-based company. We've got the patent right for this technology, the technology perfected. We had a land adjacent to our composite cylinder factory. In that factory, the plant is now coming up. And we hope the plant will see the light in the second half of '21 -- 2021.
Okay. Sir, is it possible to highlight what is this product?
Cross plastic film.
Okay. Okay. Okay. And sir, how much is the total -- you indicated CapEx submitted is INR 350 crores and last year, the total CapEx which was done was around INR 230 crores, INR 240 crores. Sir, by which year do we see this entire CapEx actually yielding revenue? So I think one of the prior question was that our asset turn is going down. So if we look at these 2 numbers together, it will be nearly INR 600 crores, so there might be some incremental CapEx.
Somani, can you reply?
As we mentioned earlier also, you see the CapEx commitment is one part of extra CapEx on the ground. Last year, we have committed CapEx of more than INR 350 crores, INR 400 crores. INR 230 crore CapEx we spent on the ground and INR 182 crore CapEx, which we have committed, is carryforward for delivery in this current year. You see, you make the orders, you place for the orders, but the equipment takes its own time for delivery. The current year, this INR 350 crores what we are talking is inclusive of INR 182 crores, which is carryforward from last year. As of now, total commitment, including carryforward is about INR 250 crores, another INR 100 crore, INR 125 crore, we are just evaluating. In due course of time, we will take decision. But as of now, the CapEx commitment just INR 250 crores. And about the asset also I explained to earlier, because in the new greenfield plant, we have to plan for the bigger expansion in the time to come. So we have to invest more monies for land, building and putting up the infrastructure. So revenue does not start from the year 1. It takes its own time. That's how the revenue -- asset turn has come down definitely yes. Certainly due to -- first factor is about the larger CapEx on the infrastructure, building. And secondly, some CapEx, which we have incurred, not generating the enough revenue. Like the composite cylinder, our CapEx of INR 120 crores is not generating any revenue. So mix reasons are there. I hope it is clear?
The next question is from the line of Abhishek Ghosh from DSP.
Yes. Congratulations for a decent set of numbers. Sir, just a couple of things. Say, about 3 to 4 quarters back, we were talking about some dealer discounts on the Packaging segment. And now we are at a stage when we have taken a price hike of 3%. So how should we look at overall competitive scenario in the Packaging or the Silpaulin division over the last 12 months? How...
As I told you, the discount is separate. Price is our pricing policy. Discount, we may give at a particular time to push up the volume. But as the raw material cost has gone up, we have increased the price and our increased price is passed through in the market.
Okay. Okay. But are you also seeing weakening of competition? Because you also mentioned that you have gained market share. So are you seeing a lot of the unorganized players kind of getting weakened? Are you seeing that kind of phenomena in the market?
Up till now, we have not seen anybody's quality -- product quality compared to our product. After all, we are selling on performance of product.
Sure. Great. Great. And sir, just 1 more thing. Over the kind of CapEx that we are doing for the last 2 years and for the next couple of years also, the share of value-added products and given the month-on-month product launch that you mentioned about, what is the kind of value-added proportion share that one should look at in the next 3 to 4 years?
I think every quarter, we go on increasing. Even in this quarter, which was a tough quarter, our share of value-added item has gone up from 32.26% of the last year to 36.33%. So we go on increasing our business of value-added item.
Okay. Okay. And sir, just 1 last thing. In terms of agri also, you mentioned you have seen a growth that is again because of agri pipes. That is, again, because of some market share gains, but generally, the overall market has grown in that market?
No, it looks, there was market share gain. Some suppliers were not fully equipped because they may not be getting labor to operate that plant. Many places, there were labor restriction.
The next question is from the line of Madhav Marda from Fidelity Investments.
I just wanted to understand something on the other expense side. Our usual run rate for other expenses is about INR 200 crores a quarter. And this quarter, it's about INR 120 crores. So of course, part of it is because volumes were lower. But has there been any like savings on the fixed cost side that we've implemented because you've indicated strong fixed cost controls as well?
Somani, on the CapEx side, can you reply?
Yes. We are very cautious, and we are monitoring each and every cost very minutely. There are 2 parts to it. Other expenses, there are 2 parts to it. One is related to the volume of the business because the other expense includes your freight and forwarding, your commission on sales, which is related to the business. Since the business was low, those will automatically come down. The second part, which is important, which is in our hand, and what we are working on, is minutely looking into each and every cost at grass root level, every plant, every office. And I can just give you a figure, I think we have been able to reduce our fixed cost in the quarter, about INR 12 crores to INR 13 crores in this quarter, which includes certain things by default also because there is no traveling taking place. We are not in a position to participate into any kind of national or international exhibitions kind of things. But certain things which are with us, the various kind of annual maintenance contract, various kinds of plant maintenance, everywhere we are working very hard and trying to save the fixed cost on this.
Sir, so INR 12 crores to INR 13 crores for the full quarter, you're saying, right?
Full quarter, yes, I'm saying.
Okay. And then that part of it, I would assume, once things normalize, hopefully, in next few quarters down the line, this would come back, right? Like this is not something which is like permanent in nature?
No, something would be permanent in nature. Definitely, yes. On operation front, whatever we are doing, it will be permanent in nature.
The next question is from the line of Sneha Talreja from Edelweiss.
Congratulations for a very good set of numbers. And just wanted to understand, sir, where are we in terms of utilization in all our segments currently. So like you mentioned in the Plastic Pipe segment, I think we are almost at optimum utilization. Where are we with respect to utilization in other segments like Industrial, Consumers, I mean, Furniture?
Somani, can you give the number?
No, I think what we mentioned earlier also that after the gradual recovery, the Plastic Piping, Packaging Film and Cross Laminated Film and Material Handling, they are near to normalcy as compared to the previous year July. The -- still where we are not getting the normalization is furniture. That is the consumer product, industrial component and protective packaging product. Still, we are running between 50% to 70% of the capacity what we had in the last year, July.
Got that, sir. Sir, my second question was relating to more of a broader view. Just want to understand with this Make in India campaign and all, is there any kind of import replacement opportunity that we are seeing in India on a broader perspective? Or are there exports opportunity opening up for the company?
What did you say? Please say it again.
Sir, I was asking, in case we are seeing more import replacement opportunities, like are you seeing your categories replacing import in certain areas?
We are not making any product where -- by and large, where we have to compete against import.
And what about exports, sir? Are you seeing substantial amount of exports in certain categories?
No. Export, we see Gulf market is weak. Because the revenue has gone down. We have got improved business in our cross laminated film. We have got improved business in our performance packaging film, but we are a very small player in the world market. Our turnover of export market is less than 3% of our overall turnover.
And there, you don't see any structural change happening?
We are presently a domestic-oriented company. And we have good -- in the country, the export side, there's not a great push given, if the government [ helps you and steps are initiated ] for encouraging people to put a large plastic processing plant for catering to global demand. Such policy is not there. So we don't invest money otherwise. Here only niche market where we can afford to export even with other constraints in the country, that only we participate.
Got that, sir. Sir, 1 last question, if I may just ask, was related to our margin. So we have seen very healthy margins. As you mentioned, this quarter was actually driven by the more of Agri segment, which we understand has got lower margins compared to your plumbing side. And secondly, you also mentioned there is some amount of inventory loss, although it may not be very substantial. Despite that, we've seen healthy margins compared to -- I mean very similar to last year. What could be the drivers here? And which are the drivers which are actually sustainable in the long term?
The margins were quite low now. But we had last year 15.5% for the full year. And this year, first quarter is around 11%. So margins are quite low compared to the full year.
Sir, I was meaning in terms of your Plastic Piping segment. So last year, we must have done 11.3% your operating margin...
It is very difficult to give you any guidance for the year.
Besides I may add here, because there was saving in that other expenses also, that also has led to the improvement in margin, as you understand.
Right, right. You are right.
The next question is from the line of Aasim Bharde from IDFC Securities.
So first question, can you talk about how your various segments have fared in the month of July? Has momentum continued that we saw in June? Or has there been any tapering off?
No, -- in July, due to local lockdown, it is not faring as good as June. July, too many local lockdown state by state. I can count 12 states or 15 states. There are lockdowns of some type or other. So they have completely put in a block in our -- throughout the business. Aside from South India, Karnataka, Andhra, Kerala, Bengal, Orissa, Chhattisgarh, Bihar, state by state, Maharashtra, U.P., lockdowns here, Bhopal, Madhya Pradesh. So the businesses, you could sell the goods. We are very proud of our marketing team and our plant people. In spite of so many lockdowns, they are able to maintain the tempo. Wherever the lockdowns are lifted for even short period, they try to see that they can meet the requirement of the market even for a short period. It is quite tough to operate the business nowadays.
Right, right. But still, at the overall level, I think I would assume that things have slowed down a bit at the company level in July compared to June, given the sporadic lockdowns that are happening?
Normally, July is a lean month. Normally July is a lean month for the company. July is the rainy season.
Right. Right. Sir, second question, sir, on the PVC resin price trend, how do you expect to see this move in the near term? And do you expect any cooling off after such a sharp rise?
PVC resin price is very tight. It requires innovative ideas how to procure the requirement.
Okay. Okay. So there is a shortage still and so prices will still stay high?
There is acute shortage. Price becomes secondary, first materially short.
Right. Okay. Okay. Sir, final question. Could you just give a rough split of your revenue between urban and the smaller market? A rough number.
Sorry?
Between your urban and, say, Tier 1 markets, which are still virtually shut down right now, how much of your revenue used to come from these markets earlier?
In housing, the major business comes from metro and Tier 2 cities, and they are the major market you are seeing.
If I want to put a number on that, would you be able to give a number?
No, we don't give the number. I have nothing to share.
And congratulations on a good performance in Q1.
Next question is from the line of Dhruv Jain from Ambit Capital.
Congratulations on a good set of numbers. My question was on your Plastic Pipe business, you highlighted that Supreme has gained market share in this quarter. Just wanted to know how much of it is sustainable considering there were some lockdown-related issues faced by some of the organized guys? And how do you expect the industry structure to change? Can consolidation happen at a really fast pace in this space going forward?
We are going on investing money to create more and more capacity to be available for '21, '22 when we believe the market will be in better shape. And see, we are fully aware that there are many territories in the country where our reach is nonexistent. So presently, we are trying to penetrate in so many territories where our reach is poor. We got very strong network of distributor, retailer and plumbers. And we are working in tandem with all of them to increase our reach in various markets. So efforts are going on so that we should go on increasing our business with a good speed, better than market.
So sir, this reach would be directed at which region, East maybe?
Sorry, say that again?
So basically, our -- we put up a plant in Kharagpur. So basically, we are trying to increase our reach in the East right now?
East also, South also, we are putting large investment in Jadcherla. Out of INR 350 crores in investment, we are investing INR 130 crores in Jadcherla. And where we are putting more and more money on plastic piping system. We are putting the 2 new system also. Today, we have 32 system. After Jadcherla is fully operational, which can happen by end of March next year, we will have 34 system. The first time 2 new system will come in our company end of March at Jadcherla. And we are also putting Jadcherla capacity to make PVC pipe and CPVC pipe.
Okay. And sir, second question was with respect to inventory. So in FY '17 and FY '18, we added about 500 new SKUs in our Plastic Pipe business. Over the last 2 or 3 years, that number has gone to 200, 250 sort of additions. Now you highlighted that in the first quarter, we've added 230 new SKUs. But can this 500 -- can this run rate go to 500, like it was in FY '17 and '18?
Somani, can you follow it?
230 is the plan for the year. First quarter was 15 number. That is the plan for the year, not for the quarter.
The next question is from Shrenik Bachhawat from JM Financial.
Congratulations on a good set of number. Sir, my question was relating to the agri pipe business. I got an opportunity to speak to large distributors of Supreme. So they highlighted that the quality of the agri pipe is so good that it easily runs for 7 to 10 years without any damage. So I was unable to understand how does the replacement demand come every year so much. So can you throw some light on that?
No, there are so many field still unallocated. So government is opening so many small, small dams, wherein a small dam comes, then in those field, which were not allocated earlier, the farmers start putting new line to irrigate this field. So demand will go on coming. And after all, we are replacing our agri pipe with some of our competitor pipe also in some markets. Both things happen.
Okay. And sir, the agri pipes can be used for housing applications as well? So I couldn't understand that part.
Yes. Right. Somewhere people use our agri pipe for housing also.
Okay. And this phenomena is seen in the rural areas or even in Tier 2 cities?
No, even in Bangalore city. Bangalore is a big city. Bangalore, you could use tubular pipe for housing, but there are many builders who use agri pipe also for housing. Then they use our agri sheet fitting also. It is the choice of the builder now.
The next question is from the line of Siddharth Goel from ICICI Prudential.
This is Prakash Goel. My question is, sir, with respect to the rural economy, are you seeing an uptick?
Sorry?
See, in rural economy, we are given to understand there's a buoyancy in the rural economy compared to the urban economy. So are you seeing the similar trend in the businesses you do?
I don't know -- significant?
Yes. Are we seeing significant growth in the business segments in which we are operating in the rural segment?
Yes, we are supplying them agri pipe and cross-laminated film product, like tarpaulin, food storage cover and also pond lining. And otherwise, we are selling in agri segment, our pipes -- all type of pipe casing, pipe, submersible column pipe and normal agri pipe. These are the product we are selling in rural area. Apart from a small sale we make of furniture, we also sell our material handling crate for food and vegetable. There also demand is growing. In material handling also, now instead of lousy quality of reprocessed material crate, people are buying more and more from us in our food and vegetable segment. And there also crate demand is also coming up nicely from rural area.
So basically, you are saying if we compare urban to rural, rural is doing better for you as well?
This quarter.
Okay. Okay. And now sir, now, second part...
It is not that urban part they don't want to buy from us, urban part was mostly closed, mostly shops were closed. So they couldn't buy us -- buy from us. Otherwise, our business would not have gone to a beating. We had a big restriction in our demand. The turnover has gone down too much, by 27% our turnover has gone down compared to last year.
See, basically, I may add here, like the Consumer segment and the Furniture segment, the shops were not open only, so how can we sell the furniture?
[Foreign Language] Consumer is the one that is subdued, even housing also, no?
Yes, housing also.
Housing also we could not sell because the cities and towns were closed for many, many days. Even today in Bombay, they are mostly closed now. In NCR area, which is a big housing market for us, it's mostly closed today.
Okay. Okay. Sir, the second part of the question, you said that July has been reasonably difficult with 12 states going for variety of lockdown...
Not difficult. July is the lean month, but this month, July has become further aggravated by the lockdowns.
You are comparing, sir, June versus July or you're comparing Y-o-Y?
I say compared to June, July is lower. And compared to last year July, also the July is lower this year also. Compared to last year July, July is lower. Compared to June also July is lower.
And the lockdowns are more prevalent in the urban part of the like demand or it is hurting the rural part of the demand as well?
Lockdown is mostly in areas which are economically powerful area, like in Orissa I give example. Orissa, 7 districts are probably in lockdown, but they are the 7 districts where most of the economic activity happens. So in selected area, there are lockdowns. And they are the area where the economic activity -- and Bombay is in lockdown. Because they say, MMR area is still in difficulty. So because MMR is in difficulty, Bombay is even in lockdown. Bombay is a big market. NCR is a big market.
Okay. Sir, this e-commerce thing, from a consumer segment point of view, how would be that segment? And what is the strategy going forward?
E-commerce -- our thing is going mostly furniture only. It is a small business. We sold only INR 50 lakh in this April-June quarter. In the previous year, it was 0, and we are now putting more and more product in SKU in furniture. And we hope that month after month, we'll go and sell in more furniture by e-commerce route.
We'll be able to take 1 last question. We take the last question from the line of Mr. Kashyap Pujara.
Yes, Taparia-ji, just 1 question was pertaining to the transition from the unorganized to organized market. So clearly, in these times, we're going to see survival of the fittest playing out. And in piping, the unorganized share has been coming down and will accelerate in terms of the way it transitions to the organized market. But my question was mainly about the Silpaulin side of the story. There considerably new competition had come in, in the last 1 or 2 years, which kind of pulled the prices down. And now that we're seeing growth coming back, but we are also -- are we also seeing that the competition is significantly weakened, and we are able to see less competitive pressure from those pockets? And maybe there will be fewer players going forward in Silpaulin category?
Two minutes of time on Silpaulin. In 3 years before, Silpaulin is the top end of the tarpaulin and lower end was INR 50, INR 60 kilo [Foreign Language] film. So many people came, 8 to 9 people came. They kept price 15%, 20% lower than us. And so we were under pricing pressure. So we dropped price over a period 6% to 7% of our Silpaulin price. And then they are still keeping price 15%, 20% lower, but after 2 years' experience in the Consumer segment, now the segments are those players, their tarpaulin are selling at INR 140 a kilo. And there now 3 segment has become in tarpaulin. Our product, and then INR 140 kilo tarpaulin and INR 50 kilo tarpaulin, which was there earlier also. So people who want very quality tarpaulin, they want Silpaulin. The people who can afford to go a little lower, then they want the second grade. Otherwise, they go by [Foreign Language]. So I think now we are not concerned about the competition because they could not maintain -- make the quality and there was no way to make the quality because they've the stolen hardware and stolen hardware couldn't deliver the product what was being made by Supreme Industries.
Sure. But are there other financials, given the lockdown that you've seen, are they financially able to kind of survive? Or would the number of players in that INR 140 category product...
Some -- among the Silpaulin, there's no competition of cross-laminated film. I think 3, 4 competitors, I think I was told they have closed down their operation. One of them I was told that they are for sale also. We are not considering them as our competition as of today. Now what can happen tomorrow, I can't say.
We'll take that as the last question.
Any more question?
We'll take that as the last question. I would now like to hand the conference back to Mr. Kashyap Pujara for closing comments.
Yes. Thank you so much. Due to time constraints, we had to kind of wrap it up. And if there are any pending questions, please feel free to write to me or to Mr. Saboo, and he will definitely answer the pending questions that you have had. Thank you so much, Taparia-ji. Somani-ji and Saboo-ji for attending the call and answering all the questions.
Thank you very much. Thank you.
Thank you.
Thank you.
Thank you very much. On behalf of Axis Capital Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.