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Supreme Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Supreme Industries Limited Q2 FY '23 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Aasim Bharde from DAM Capital. Thank you, and over to you, sir.
Thank you, Inba, and good evening, everyone. On behalf of DAM Capital, I would like to welcome all to Supreme Industries Q2 Results Conference Call. Joining us from the company, we have Mr. M.P. Taparia, Managing Director; Mr. P.C. Somani, CFO; and Mr. R.J. Saboo, VP Corporate Affairs and Company Secretary.
I would now turn the call to Mr. Taparia for his opening remarks. Thank you, and over to you, sir.
Thank you Mr. Aasim. Thank you, and thanks to all the participants. Thank you very much. I'm M.P. Taparia, managing director of the Supreme Industry Limited. I along with my colleagues, Shri P.C. Somani, CFO; and Shri R.J. Saboo , Vice President, Corporate Affair and Company Secretary, welcome all the participants while participating in the discussion of the unaudited standalone and consolidated finance result for the second quarter and half year ended 30th September 2022. The standalone results and consolidated results are already with you. I will give brief on complete product operating performance and other highlights.
The company sold 111803 tonnes of plastic goods and achieved net product turnover of INR 2047 crores during the second quarter of the current year against sale of 102673 tonnes of plastic goods and achieved net product turnover of INR 1901 crores in the corresponding quarter of previous year, achieving volume and product value growth of about 9% and 8% restrictively. The company sold 220725 tons of plastic goods and achieved net product turnover of INR 4,216 crores during the first half of the current year against sale of 173937 tons and net product turnover of INR 3,211 crores in the corresponding half year of previous year, achieving volume and product value growth of about 27% and 31% respectively.
Total consolidated income and operating profit for the second quarter of the current year amounted to INR 2,092 crores and between INR 166 crores as compared to between INR 1,932 crores and INR 350 crores respectively for the corresponding quarter of the previous year resulting in increase of about 8% in consolidated income and decrease about 53% in operating profit. Total consolidated income and operating profit over the half year in the current amounted to INR 4,303 and INR 493 crores as compared to INR 3,279 crores and INR 617 crore respectively for the corresponding period of the previous year resulting in increase of about 31% in consolidated income and decrease of about 20% in operating profit. That consolidated profit before tax and profit after tax for the second quarter of the current year amounted to INR 105 crores and INR 82 crores as compared to INR 296 crores and between INR 259 crores respectively for the corresponding quarter the previous year, just a decrease of 65% and 64% respectively. The consolidated profit before tax and profit after tax for the half year of the current year amounted to INR 373 crores and INR 296 crore as compared to INR 509 crores and INR 399 crores respectively for the corresponding period of the previous year, yielding decrease of 57% and 26% respectively.
The previous scenario of all the product segment of the company for the second quarter of current year ended 30th September 2022, as compared to the corresponding quarter in the previous year has been [indiscernible]. Plastic Piping System business grew by 9% in volume and 2% in [indiscernible]. Packaging Product segment business grew 3% in volume and 18% in value term. Industrial Products segment business grew 19% in volume and 32% in value term. [indiscernible] product segment business decreased by 8% in volume and grew by 1% in value term. The Board of Directors have declared interim dividend at 300%, that is INR 6 per share of INR 2 each for financial year 2022 2Q '23. The dividend will be paid to those shareholders whose names stand on the Register of Members as on the record date that is 9th November 2022. The overall turnover of value-added product increased by INR 798 crores during the second quarter of current year as compared to INR 758 crore in the corresponding quarter of the previous year, achieving growth of 5%. The company had total cash surplus of INR 493 crores as of 30 September 2022 as against cash surplus of INR 518 crores as on 31st March 2022.
Business outlook, Plastic Pipe System business profit was severely affected due to continued price hike in second quarter, which started with [indiscernible]. The company supplying piping system from different polymeric materials also other than PVC, which overall resulted in positive outcome in this segment in spite of severe fall in PVC prices. In such a difficult business situation the company's continuous volume growth in second quarter was quite encouraging, which is still [indiscernible] in resin price where resin prices have dropped by INR 55 per kilo, that is 38% since April this year, [indiscernible] large volume growth in second half of the year as system becomes very affordable. The company fully cleared to cater to increase demand of product with increase of available capacity by [indiscernible] starting on July and operational fully by December this year and also brownfield expansion of capacities at other locations. The company expects to achieve 25% plus volume growth in this segment for the year compared to last year's business. The company introduced [indiscernible] piping system in this division, which were well received. Further new systems are going to be launched during third quarter to augment the range to the market. The business of cross laminated film has started showing improved performance with increasing business of product and penetrating in many export markets. The division introduced many new major products and were successful in expanding its market yields and making breakthrough in 3 new export markets. The division expects 10% volume growth in this business segment for the year with improved profitability.
The industry component division business conditions are improving and company expects demand scenario to further improve in sector of [indiscernible] which constitutes a larger part of this business. Material handling division is continuously expanding its customer base, introducing new products and also investing new machines and moulds as we strive to continue enlarge the customer base and product portfolio. The furniture division had well during the first half of the year, its turnover has grown up from INR 159 crores to INR 206 crores with improved profitability and 17% volume growth over the corresponding period of previous year. There is a steep price reduction in polypropylene pricing, which is [indiscernible] raw material during the second quarter, leading to degrowth in volume in the second quarter. This result overall in improved volume and profit for full year in this division. In composite LPG cylinder division, orders are big from existing as well as new customers, but unable to participate due to capacity constraint. Existing capacity is running at full capacity and primarily catering to the order issued from Indian Oil Corporation Limited. Work on doubling the capacity is progressing and it will likely it will be operational by December, January -- December 2022. Protective packaging division is doing good [indiscernible] sport goods, yoga mats, kids puzzle and toys. The division is continuously developing and introducing new product for a variety of application. Initial feedback from the market is encouraging and expect to drive the profitability for the division going forward. The division continued to develop various customized solution for the retail industry and expects a good business for the division. Good growth is witnessed in the export market also.
Performance Packaging Film has done well. Exports have also grown and received good response from countries in Middle East, Africa and Europe with improved product mix and focus on increasing customer base, the company will soon have our capacity fully tied up and will look for expansion opportunity. The company CapEx plan for the year 2022, 2023 of about INR 700 crores, including carry forward commitment of INR 350 crores is progressing with a little delay from the initial schedule. The entire CapEx shall be funded from internal accrual.
The prices of different polymer, particularly with polypropylene, low density polyethylene and poly vinyl chloride has gone down between INR 31 per kilo to [indiscernible] per kilo since beginning of the year till now, that is a reduction between 21% to 13%. [indiscernible] large consumer of PVC resin which has witnessed the highest fall since April 2022. This sharp reduction resulted in inventory loss, but has made the product more affordable. Company expects the business conditions to improve during the second half of the year and remain optimistic in various business segment where it operates.
This is a brief and overall summary for the quarter and year ended under reference. Thank you for your patience. Now I and my colleagues, Shri P.C. Somani and Shri R.J. Saboo are available to reply to various queries led by all of you.
[Operator Instructions] The first question is from the line of Sujit Jain from ASK Investments.
Yes, congratulations on a good set of volume numbers. Is it safe to assume that the decline in gross profit margin entirely accounts for the inventory losses that would have been there in the quarter?
Yes, you can safely assume, it is entirely due to the event loss suffered not only in TBC, but partly in LDP and PP.
And that is about 7% to 8% of the sales in case, that is falling gross profit margin?
As you see our margins have dropped now. Our volumes have gone up and our overall profit has gone down.
Yes. I'm saying 8% drop in gross profit margin should be entirely accounted for by the inventory losses?
It could be 8% to 10% also. You see ultimately one cannot decide the county, but roughly estimate between 8% to 10% of the sale on INR 2000 crore.
Right. And this guidance of 25% volume growth, is it for the full year volume growth or it is for H2? Because then that means close to 33% growth in H2 volumes.
At least for the plastic piping division for the full year. Last year, we sold 2 years 73,000 tonnes. And this year, we anticipate to sell 340,000 tonnes of Plastic Piping System.
Right. And Jal Jeevan mission, you have mentioned the order that you received that will -- which kind of pipe will go into that order? Will it be PVC pipe or that will be HDPE pipe?
It would be high density polyethylene pipe.
Okay. And the growth -- sorry?
HDPE pipe. Yes.
And the growth that we have locked in pipe volume this quarter has come mainly from growth. If you can just split the growth between PVC pipes growth Y-o-Y and CPVC growth and as well as application? Did it come from plumbing or did it come from agri?
July, August, September or any season. In July, September, the demand for [indiscernible] comes down, so it is mostly from housing and infrastructure.
And within that PVC and CPVC, if you can just quantify the growth Y-o-Y?
We can say that overall, our growth -- our sales of plastic piping is around 80% in PVC system and 20% other polymers, which include high density polyethylene, maybe low density polyethylene, polypropylene and CPVC.
Got that. So what would be the growth in CPVC pipes Y-o-Y, volumes?
In quarter -- this quarter, we grew by 21% and half yearly we grew by 44%.
In CPVC in volumes?
I'm talking volumes.
Right. And similar numbers for PVC?
[indiscernible] polyethylene number also is there. [indiscernible] in PVC.
Sure. And one last question. Consumer volume is down 7.7% Y-o-Y. This is just a blip or could there be a particular reason why it is affected?
July, September demand was weak for furniture. [indiscernible] and furniture demand was weak [indiscernible] customers were destocking -- our distributors were destocking.
Our next question is from the line of Rahul Agarwal from InCred Capital.
Seasons greetings to everybody on the team. 3 questions quickly. Firstly, on the PVC price. So obviously, it's down 35% since April. When I see the company realizations, they are not down as much. Like in first half, it looks like 11% to 12% since April. Is this because of sales mix change? Or is there any other reason to it?
In first quarter, there were less sale of a plastic -- PVC plastic and the sales were more of other items.
And how is that doing in second quarter?
Second quarter, the sale of polyethylene pipe system growth for the infrastructure during rainy season demand come down.
I understand. So it's basically a function of sales mix, right? The mix change basically led to the realizations falling lesser than what it should be. Is that correct?
That depends on the market situation, we drove the price to the market situation. In the [indiscernible] in the month of April, May the demand from the farmers was very good compared to last year. Last year, if you recall, April, May, the country were affected by COVID second wave and then affected more rural areas. So the demand from retail segment was very weak in last year, April and May. This year demand was very robust. So when demand is very robust, we are not necessarily required to drop the price to the same extent.
Got it, sir. Sir, second question, a clarification on the guidance you gave 20% volume growth was for the entire company, right?
For the entire company, yes.
So that implies like a 100% Y-o-Y growth in second half. Is that correct? Because we have done about 170,000 tonnage in first half..
In first half, we sold 220,725 tons.
Right. And full year, we're talking about 470000 tons.
394000 tons we sold last year [indiscernible] it becomes 470000. So we expect to see 250,000 tons in second half. So 220,000 tons in the first 250,000 second half.
Got it, sir. And last question was on inventory loss. Was the inventory also marked down as of September 2022? Or it was only related to sale?
The inventory is actually not down naturally following the accounting principles.
Okay. So I mean incrementally third quarter, whatever, in case if there is further fall, the inventory loss will be restricted to the market price as of September. Is that correct, sir?
Yes, you're right.
Our next question is from the line of Abhishek Ghosh from DSP.
Sir, just until last quarter, your volume guidance for almost 15%, it's moved up to 20% now. Obviously, there is an amount of lower PVC prices. But in terms of agriculture, housing, infrastructure, any other segment that you're seeing now, the confidence in volume growth is much better any of the segments?
We are seeing good growth in furniture also. Furniture in the second quarter was weak. Now we are seeing -- the prices have come down dramatically. So the product becomes more affordable in a lower segment, which will give better volume. The demand from all segments the demand are looking better because the price of the polymers will come down in all the polymers. [indiscernible] less commercial product, they will like to buy quality product. So we are seeing better demand now going forward.
Okay. Got that. And sir, any thoughts on agri demand. There's also a short season now. How are you seeing that happening because Agri has been weak for some time. So in light of PVC prices correcting now, how should one expect that?
Agri demand will be super this year.
Sorry, agri demand will be?
It will be very good this year. For three regions. The most of the state dams are full with water. Secondly, the price have become very affordable. And thirdly the condition of the crops are extremely good today.
Okay. That's helpful, sir. Sir, the other thing is over FY '23, you have 3 greenfield capacities coming through and some brownfield expansions also coming through. So in tonnage terms, how much of overall capacity, which will get commissioned in FY '23?
Total capacity will be 80,000 tonnes. And this year, we will get benefit of between 30,000 tonnes.
Okay. So 80,000 tonnes of capacity increase and 30,000 tonnes of sales from that? Is it right?
Because the plant will start one after another.
Okay. And is it fair to assume, sir, that given the polymer prices where it is, that new capacities will be able to ramp up to that 50%, 60% utilization in 2 years' time? Is that a fair assumption?
Yes, it's a little better, normally we achieve 65%.
Okay. The 65% in 2 years' time is what the expectation would be from the new capacities which are coming?
Yes, our efforts will be even within 1 year.
[indiscernible] dear friend.
Sure, sir.
[indiscernible] possible.
Okay. Great. Great. And sir, just 1 last question. Since you have mentioned about this olefin tax and all these new rain systems that are coming across, how should one look at the value-added product mix from here on, which is at about 38% for 2Q over a medium term, how should one look at the value-added product mix?
This tax system is [indiscernible] is very, very great. This olefin system is very, very great. [indiscernible] will also grow as we anticipate turnover of INR 9,000 crores this year, the diluted percentage also will grow now, earlier the volume will go.
Our next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Congrats on a good volume performance in a difficult environment. My first question is, is it possible to share how has been the industry going in the first half or maybe in the second quarter, especially given that channel has been sitting on a very lean inventory. This will give us some sense in terms of how the organized players will do?
Now I tell you the overall picture that Reliance has given us information that last year, the country consumed 2.73 million tonne of PVC. And this year, they anticipate the country may consume 3.26 million tonne, which is -- we expect the country may reach the level of 2019, '20. 2019, '20 our company sold 299,000 tonnes plastic pipe system. This year, we anticipate to sell 340,000 tonne plastic piping system. So we anticipate that compared to 2019, '20, we may grow by around 13% in volume compared to '19, '20, pretty far of what has been the growth in the country. It means our market share once we achieve this [indiscernible] compared to everybody, our market share will increase this year.
Okay. Very well explained, sir. This is very helpful. Second, sir, is it possible to share how has been the performance of the Silpaulin business? And is it still being classified under the value-added category?
Silpaulin is very, very good for sure. And now I'll focus more on export -- in taking export and also on other product. Tarpaulin is a product -- value added product vision for the year. So that is the volume we are focusing more. And there because they are value-added, they require more fabrication capability. So our realization of the film also goes up. So we anticipate better profit also and better volume this year.
And sir, how has been the situation of those copy products, which had come in the markets, have they got exposed and the sort of price increase?
They are export. Now they're produced on kilo basis [indiscernible] like what we were selling. Now we can selling on kilo basis.
So this should help us in terms of improving our pricing power in this segment?
Your judgment.
And sir, lastly, is it possible to share any update on the succession plan?
Thank you very much.
Our next question is from the line of Venkatesh Balasubramaniam from Axis Capital.
Yes, sir, I had a few questions.
[indiscernible].
Yes. Okay. I had a few questions. The first 3 being, sir, you mentioned that at the end of the second quarter, you will actually tell us and quantify what was the quantum of the inventory loss. So is it possible to share what was the inventory loss in the first half? And what was the inventory loss in the current quarter? That is the first question.
[indiscernible], between INR 200 crores to INR 250 crores.
You said INR 250 crores for the first half, correct?
First half between INR 200 crores to INR 250 crores.
INR 200 crores to INR 250 crores, okay. And what about the second quarter of the current year?
Second quarter was a larger portion because it was lean season and price dropped more sharply in second quarter. We started from the middle of June and continued up to first of October. So we have more severe loss in the second quarter.
Okay. So second quarter could be almost INR 150 crores to INR 180 crores, correct? Am I correct?
No, very difficult to say.
Very difficult to say. Okay.
We can share you the overall inventory loss will be [indiscernible] only in the month of April next year.
Okay. Understood. Now the second question.
Until next year, we can't say.
Okay. Now the next question which I had was I guess -- there was a -- management was on TV post the results. And given a guidance -- volume growth guidance you already know, but I was just reconfirming that you mentioned that this year, you can do INR 9,000 crores of revenues and 12% to 12.5% EBITDA margins, am I correct?
Yes very correct.
Yes. Okay. Lastly, 1 small -- tiny little question. Your other expenses in the quarter have gone up quarter-on-quarter by INR 16 crores and your power and fuel expenses have gone up by INR 9 crores. Can you please explain why this quarter-on-quarter increase has happened in these 2 items?
Power and fuel because of the volume. If you look at the volume what we produced, we are looking at volumes sold, if you look at volume produced from first quarter to second quarter, about 14% higher volume we have produced.
Okay. And this is just volume related? There is nothing where prices have gone up of something, especially I'm asking on the other expenses side.
Other expenses, you see the certain order of what you get from the delivered prices, the first component because many of the orders now we're getting [indiscernible] . So your revenue becomes higher but then your cost of freight comes in the part of [indiscernible] capacity, which we are where, so we will be incurring more expenditure.
Next question is from the line of Sonali Salgaonkar from Jefferies.
My first question is regarding the current demand scenario, especially in construction or real estate. You did mention that you expect Agri demand outlook to be very good this year, but what about construction? What are the initial feelers you are getting from the industry right now?
Agri demand is very robust.
So both in rural and as well as urban?
Yes.
Okay. Fair enough. Sir, secondly, could you help us understand what is the PVC trend from the first of October? How much it has fallen? How much do you expect it to fall further? And if you do expect some lingering impact of inventory losses in Q3 as well? And where do you expect them to stabilize?
I must tell you that last month the PVC prices have fallen [indiscernible] this month October. They have fallen by INR 7 and company gave [indiscernible] scheme also. Now, the prices have dropped if I consider the scheme also the price dropped by INR 61 since 1st April and as on today, INR 61 prices have dropped. So it's such a big drop that I can't say the prices will not drop, but it may drop maybe INR 3, INR 4, INR 5. After INR 61 drop, I can't say [indiscernible] has already gone up from INR 140 to INR 79.
Got it.
The worst case it may drop by INR 9 also in month of November, mid-December, not much room now to drop.
Got it, sir. Sir, my third question is could you help us with your segment is capacity-wise right now? And you did mention 80,000 metric tons is what you expect as new capacity in FY '23. So I'm just...
Yes.
Yes. Go ahead, sir, please.
No, please continue.
Right. So you did mention 30,000, I'm just a bit confused upon that 30,000.
30,000 because the capacity is one after another. The plant [indiscernible] start by end of December, plant at [indiscernible] probably start by end of November. So we may get 3-month or 4-month production. So that's why you cannot get more than 30,000 tonnes this year, so for this year only.
Okay. Got it. Sir, segment-wise capacity, please?
Capacity for the FY '23, you want?
Yes, sir.
So plastic piping system, it will be close to 580,000. For industrial product, it will be close to 83,000. For packaging products it will be 90,000. For consumer product, 30,000.
Our next question is from the line of Sneha Talreja from Edelweiss.
Just 2 questions from my end. First thing, you spoke about packaging in the cross-laminated division where you have spoken about 10% sort of a guidance for your growth. Is it only for the cross-laminated unit? Or is it for the complete packaging division that you have as a whole? That was the first one.
It was cross-laminated.
Okay. So any guidance for the complete packaging also? Or should we assume that 20% for the entire company now?
For packaging segment as a whole, you can count similarly. We'll come back to you.
Secondly, as you were saying PVC prices were almost at the bottom is what you are seeing. So has the channel already started picking up inventory due to which we have seen much better volumes than what we were expecting in Q2? Or is it...
Sorry, please raise your question again.
I was asking since you were mentioning that PVC prices have already fallen so much and they're almost at the bottom, have the distributors started picking up inventory again. And are we seeing pickup in the inventory levels? Or are they still at the bottom end?
I think we can better replay only in the month of January because this month was a month of festival, earlier it was Dussehra, then Diwali and [indiscernible] . So all the big festivals are over now. Now the remaining 5 months there is big festival of Pongal and Holi, but they don't affect the business. So we can tell you on the end by end of November. Now we will be reaching on in January, then we can tell you the demand. But normally, in commerce is I can say we will start building inventory properly, like business sense, not commercial sense but in a business sense.
Understood; sir. Understood. And sir, last one, I actually missed out the number for the CPVC volume growth. Can you repeat that again for Q2 as well as H1?
Q2 was 21% and 6 months was 44%.
[Operator Instructions] The next question is from the line of Achal Lohade from JM Financial.
My first question was in terms of the correction in the PVC price, if you could elaborate a little bit as to if it was passed on, was there a significant lag during the second quarter?
No, we dropped the price immediately.
Okay. So what I was curious about, if you look at the Q-o-Q decline in the average PVC price, it's somewhere around 25%. But in our case, the drop seems to be just 10%, 11%, this is for plastic piped products. Just wanted to check if there is a significant change in the product mix compared to first quarter?
Again depending on the particular market situation. Now we say that our prices are completely -- the benefit of price reduction has gone to the market. Now we can declare today [indiscernible] benefit has gone to the market.
Right. No sir, what I was trying to understand is in terms of the average realization for the quarter for the Plastic Pipe division, it's decline of about 11% compared to first quarter as compared to a 24%, 25% drop in the PVC resin price. So, the decline in the realization is lower than the PVC price.
The plastic pipes doesn't contain only PVC, we got polyethylene pipes, low density product, we got polypropylene pipe system, CVP pipe system So there are many systems that go into plastic pipe systems, it is not only PVC pipe system.
Right Okay. So you mean it's to do with the product mix, but the drop in the realization is not as much as the PVC price realization declines. Is that a fair assessment?
Our plastic pipe system is not 100% only PVC system.
Got it. Sir, second question was in terms of the guidance, what you mentioned is 12.5% -- 12% to 12.5% EBITDA margin for the full year. As compared to first half, we have achieved about somewhere around 9.7%, which implies a 15% kind of a number for the second half. So, I was just curious, in terms of the margins, even second half will be more agri heavy period compared to first half, would that have similar margins the way it is for plumbing business, sir?
You give your calculation and it is not -- we are not mentioning only plastic piping system. We make many products. And we told 12% to 12.5%, this is for the entire company.
Our next question is from the line of Rushabh Shah from Anubhuti Advisors.
Sir, my question was pertaining to other listed entity, Supreme Petrochem. So can you give some operational highlights on the same and again, I think volume guidance for the entire FY '23?
No. Basically, we are great to inform that our first trend to increase our capacity of polystyrene and also revamping our EPS capacity, there are very well established. They are waiting from consent to operate from government of Maharashtra. And we are also expanding our capacity at Manali plant. So overall, 120,000 tonnes of polystyrene and extruded polystyrene capacity will be ready to start running from month of November this year, next month only, subject to getting the department's [indiscernible] operate. Because once you move detailed project, first you require permission from pollution board [indiscernible] then from pollution then you go ahead to expand capacity. After the capacity is established, then we approach them again to give us consent to operate. So some of the machine did not get take place due to festival this month. We hope sometimes the machine next month, and then we'll get consent to operate from them, then our capacity will go up by around 10,000 tonnes per month from both the plants. And then [indiscernible] plant is shaping up well. So our CapEx plans are going quite well. And our products are really well received. We are already sharing our volume, not only in Indian market, but we are exporting also. We will [indiscernible] raw material. [indiscernible] profit in the second quarter, but like business conditions are looking quite favorable.
Okay. Okay. So until now, we are almost running at 100% capacity. So incremental volume will only be possible once the new capacity come online. Am I correct, no?
You are right.
Okay. And just secondly, on the polystyrene prices. So we believe recently there has been, I think, a correction in the prices alongside crude prices. So how are the prices currently trending?
Nothing we have to do. We don't make polystyrene from crude. We make [indiscernible] .
Sorry, monomer. Absolutely correct, but about the prices.
We dropped the price.
Okay. Okay. Okay. And are currently any new capacities coming online in other countries? Just wanted to check on how the whole scenario is working on polystyrene prices?
We can't say -- we will give margin, and we have no problem. Indian market is also growing, we have no problem.
Okay. Okay. So second half, we can expect, again, I think margins normalize and maybe we can see the 1Q level margins again?
Normally, the price of polystyrene dropped from $1,500 in the month of June to $950, one week, whatever price dropped $950 from $1,500 in the month of June. And as the price dropped, we dropped the prices of polystyrene also.
Understood. Understood. So currently, prices are in the north of somewhere $900 correct?
No, not $900. Today, it is around $1000.
Mr. Shah may we request for you to return to the queue, there are several participants waiting for their turn. We'll take a next question from the line of Utkarsh Nopany from Haitong Securities.
Sir, first thing, on the pipe volume front, we have guided that we are expecting our pipe segment volume to grow a 25% rate for FY '23. So this implies that our pipe segment volume is likely to grow at around 4.5% CAGR in the second half of FY '23 over second half of FY '19. So just wanted to understand from you, sir, why we are expecting such muted pipe volume growth for the second half of FY '23, sir? When we are expecting a pretty positive demand outlook from both agri and the plumbing side, sir?
Second half, we are just comparing [indiscernible].
Sir, I'm comparing second half of FY '19 versus second half of FY '23, sir?
FY '19, we don't know. I can't share FY '19 today, I'm not ready for FY '19. Overall, we will grow 25% plus.
Okay, sir. Sir, second question is on the margin front. Like if you see our packaging segment margin, we are at a multiyear low level in this quarter, just want your sense on the guidance trend for the second half of FY '23 and FY '24, what kind of a margin we are looking at for the packaging segment, sir?
At first half, there was [indiscernible] it for a protective packaging low density polyethylene where the price has dropped very substantially. So there was a component to loss also. But now the price has stabilized. We're not saying comparable.
Sir, earlier we were doing around [indiscernible] tons?
Overall, we anticipate profit to the company this year between 12% to 12.5%.
Sir, we got the point, sir, for the Packaging segment specifically, can we expect our margin to improve back to again to 18% to 20%, which we were doing earlier, sir, once the resin prices stabilizes?
[indiscernible].
[indiscernible] packaging. So it should be between 15% to 17%, which ultimately the market compression is increasing. So whatever price rise in the past, you cannot restore everything back to the normal level.
And sir, like at the company level, we earlier guided 2 quarters back that we are looking at a 16% EBITDA margin on a steady state basis. So once the resin prices stabilizes can we look at maintaining 16% EBITDA margin at the company level, say, from FY '24 onwards?
We told 15% if I remember, 15% to 15.5%, we told in the month of April, I think. First let us work over this year please.
Okay. And sir, lastly, on the CapEx front, we have spent INR 237 crores in the first half. How much amount we are planning to spend in the second half, sir?
From the cash flow point of view, INR 237 crores is the cash outflow which we have made this year. Similar cash flow around INR 250 crore in the second half on the cash flow point of view.
Our next question is from the line of Rajesh Kumar Ravi from HDFC Securities.
Yes. Am I audible?
Yes, you are very audible.
Sir, you mentioned early in the call that the inventory losses was close to 10% of INR 2000 crores, which I assume was for Q2, while later in the call, you mentioned the INR 200 crore inventory loss is for the H1. Can you rectify this?
[indiscernible] is between INR 200 crores and INR 250 crores, it is very difficult to quantify, that is why the answer has given in the range between INR 200 crores, INR 250 crores.
No. But as you mentioned 10% of INR 2,000 crores. So that was pertaining to second quarter. Is that understanding right?
Yes, yes.
So if I look between Q1 and Q2, March end to June end to September end, the price fall between these 2 points is close to INR 25 to INR 30 in each of the quarters. So if in second quarter on a INR 25?
The second quarter, apart from the [indiscernible] , we have also marked down the inventory to the market price.
No. But in Q1, you did not do it.
There are a sufficient gap between the cost and the selling price.
So the majority of the losses came into Q2 numbers.
And now you mentioned that we have seen INR 8 further fall in October from September end?
There were a drop in the prices and the scheme of 2 to 3, 2 to 4. So I cannot give the INR 4 reduction, but [indiscernible] price itself. For INR 4 scheme is dropping even in the month of October.
Okay. So if prices do not pick up, would we be having further losses to the tune of 2% to 3% of top line in this quarter?
And you can't forecast so many things, but we have given a forecast we will earn 12% to 12.5%.
That is okay, well taken sir. I'm just saying if the situation remains status quo 2% to 3%?
No risk of it to go up again.
Okay, sir. And secondly is on the realization trend, if I look at on a quarter-on-quarter basis, when the resin pipes where realization has fallen around 11%, the other segment reported just 2% to 3% realization drop Q-on-Q. Could you explain that because resin prices that have fallen broadly in a similar range across the other segments?
See the product mix, like industrial product [indiscernible] is doing very well. Really, the consumer product, we are being more and more business of the value item. It's the product mix of the expected division which is holding on to the overall realization.
Okay. And earlier in the call, you were giving the breakup. So could you repeat the segmental capacity breakup September end? And this is the 80,000 expansion, what will be the segmental capacity at March end?
No, I have given market capacity only segment what I've given. [indiscernible] given 580,000 because as of March '23, which would be after the 2 plants, which are there will go in location.
Industrial products 83,000. Packaging products, 90,000. Consumer products of 30,000.
So this is a 60,000 increase only versus FY '22 is what I have[indiscernible].
What has happened is certain capacity we have transferred from our Maharashtra plant to [indiscernible]. We have completed additional capacities [indiscernible] .
So you are expecting 50% incremental -- 50% of the volume from these capacities to be affected in this year itself, if 60,000 is there and 30,000 volume contribution from these capacities? Capacity of Maharashtra was already in the operation.
I'm sorry to interrupt Mr. Rajeshkumar Ravi. Could you please return to the queue? There are several participants waiting for their turn, sir.
We'll take a next question from the line of Ritesh Shah from Investec.
Sir, 2 questions. First, can you detail our incremental product pipeline, there are several new launches. If you can specifically cite some details on one is on, second is [indiscernible] and the third is basically the bath. So that's the first question.
What is first, Biofloc?
Sir, Biofloc.
Biofloc, we have dropped.
Okay, sir, any particular reason?
If you remember, we have made a short launch industry test market, and we felt the product is not adding value to the customer. So we introduced Biofloc that time, and now we don't sell the product.
We'll take our next question from the line of Chirag Lodaya from Valuequest.
I just have 1 question. Sir, I just wanted to know what is the reason of PVC prices going down further? So earlier, the reason was a lot of dumping from China. But what we are hearing currently is a lot of shipment for December delivery from U.S. are coming at much lower prices. So just wanted to get your sense what exactly is happening in global markets?
There are two reasons. First reason is, there's a big drop in demand in housing construction in U.S.A. due to continuous increase in interest cost. The government of U.S.A. is very concerned about the inflation. So Fed is going on increasing the rate of interest, they may increase rate of interest again. Second, the reason is the housing demand is poor and around 80% of PVC by way of pipe or profile or cable are consumed in housing requirement. So the housing demand goes down and the increase in the price of cost has showed up. Because of that, they are able to get chlorine at a negative price. And that enables them to make PVC at very low cost and sell excess capacity in the world market. So today, the lowest cost supplier is U.S.A and because of them only the price has dropped much more than what was expected earlier.
We'll take a next question from the line of Mohammed, an individual investor. Mr. Mohammed your line is unmuted, could you please go ahead with your question?
This is regarding Supreme Petrochem, so once the [indiscernible] by when can you ramp from the capacity to like full utilization right now for the existing capacity?
Your voice is not clear, but you question to Supreme Petrochem.
Our next question is from the line of Vipul Shah from Sumangal Investments.
Can you give more information regarding this flex pipes, what are applications and what is the value addition we are getting as compared to normal PVC pipe?
Flex pipe is quite expensive pipe system for getting hot water. It is far better than CPVC pipe system, but much more expensive than CPVC system. Materials are also very expensive.
So can you quantify how expensive it is as compared to CPVC?
70% to 80% more.
70%, 80% more than CPVC, right?
On the bathroom side, it will cost 70%, 80% more.
Our next question is from the line of Karan Bhatelia from Asian Markets Securities.
So while we've seen a sharp decline in the PVC prices in that 6 months, how is the pricing behavior in CPVC market?
CPVC market are holding steady as of today. They are holding steady as of today.
And for last 6 months, what was the increase approximately?
No, they remain steady. There is no increase also. They are holding steady.
And the outlook there is stable or we can see some correction on that?
Sorry?
For the coming year, we expect some correction in CPVC? Or we expect them to be stable?
For polymer, I can't give you a forecast on it.
Our next question is from the line of Ritesh Shah from Investec.
Sir, my question was pertaining to the new product launches. I think you touched up on Biofloc and you touched up on pipes. Sir, any incremental color on bath division. Basically, how much is the segment doing right now? What are the targets? That was one question.
Our bath is doing very well. [indiscernible] information how much we are selling, but our business is picking very much. We have 230 varieties of bath fitting range. And we are adding more and more varieties.
Okay. And sir, my second question was, just from an understanding standpoint, when we say packaging, industrial and consumer products, what are the kind of polymers that you process over here? Is it largely HDPE and LDPE or are there other polymers also over here?
Other polymers are also which are very expensive polymers and polyethylene.
Sorry, I didn't get the answer. I could not understand.
We are having some other polymer along around the polyethylene.
Okay. Okay. Sir, my question was if you look at HDPE and LDPE prices, on a sequential basis, it has declined by 17% and 18%. But if you look at the realization decline, it is plus 7% in industrial versus minus 4% and minus 12% in packaging. So we have done actually very well on the product realization. So is it more to do with the mix of polymers? Or is it more to do with the product mix change on a sequential basis?
Both the reasons, product mix and mix of polymers.
Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.
We thank all the participants for the very analytical questions. We thank all of them. Thank you all very much, and wish you a very happy, healthy and prosperous new year.
Thank you very much. Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.