Supreme Industries Limited Q3FY23; Falling Margins lead to fall in Profits

Company Description:

With numerous production sites dispersed around the nation, Supreme Industries is one of the top producers of plastic goods in India. They provide a broad and complete selection of plastic items.

Management Commentary:

“Plastics Pipe System business profitability continued to be impacted due to falling PVC prices till November, 2022. In December onwards, PVC prices started an upward march. The low prices of PVC along with re-stocking by the retail chain improved business substantially in December. Pipe system prices, in spite of increase in PVC prices remain affordable. Demand from Housing, Agriculture and Infrastructure is quite improving. 

Company has achieved 51% volume growth in the third quarter on a lower base of corresponding quarter in the previous year, as huge destocking took place in that quarter. For the nine month period ended December 2022, Piping business has witnessed volume growth of 48% which is very encouraging. PVC resin prices which have dropped by Rs. 66/- per kg i.e 45% since April of this year till November have recovered again by Rs. 15/- per kg. since then. It looks that prices of PVC would remain range bound which augurs well for the business. Company expects to maintain the growth momentum, with an increased range of systems which are commissioned in this year along with affordable raw material prices.”

 – Mr. M. P. Taparia, Managing Director

Financial Results for Q3FY23:

Supreme Industries Ltd.’s consolidated income in Q3FY23 rose 19% to ₹ 2,319 crores. Consolidated Profit After Tax came at ₹ 210 crores showcasing a 15% fall YoY over the corresponding period. In this quarter’s results, the reports suggested that the reason behind the decreasing profitability is the falling PVC prices in the third quarter.

As displayed by the above diagram, despite the increasing revenues of the firm, profitability margins have decreased which resulted in the fall in profits on YoY basis.