The Supreme Industries Limited (SUPREMEIND) Q2 FY23 Earnings Concall Transcript

The Supreme Industries Limited (NSE: SUPREMEIND) Q2 FY23 Earnings Concall dated Oct. 31, 2022

Corporate Participants:

M.P. Taparia — Managing Director

P. C. Somani — Chief Financial Officer

Analysts:

Sujit Jain — ASK Investments — Analyst

Aasim Bharde — DAM Capital — Analyst

Rahul Agarwal — Incred Capital — Analyst

Abhishek Ghosh — DSP Mutual Fund — Analyst

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Venkatesh Balasubramanian — Axis Capital — Analyst

Sonali Salgaonkar — Jefferies — Analyst

Sneha Talreja — Edelweiss — Analyst

Achal Lohade — JM Financial — Analyst

Rushabh Shah — Anubhuti Advisors — Analyst

Utkarsh Nopany — Haitong Securities — Analyst

Rajesh Kumar Ravi — HDFC Securities — Analyst

Ritesh Shah — Investec — Analyst

Chirag Lodaya — Valuequest — Analyst

Mohammed — — Analyst

Vipul Shah — Sumangal Investments — Analyst

Karan Bhatelia — Asian Market Securities — Analyst

Presentation:

Operator

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].

I now hand the conference over to Mr. Aasim Bharde from DAM Capital. Thank you, and over to you, sir.

Aasim Bharde — DAM Capital — Analyst

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.

M.P. Taparia — Managing Director

Thank you, Mr. Aasim and thanks all the participants. Thank you very much. I’m M.P. Taparia, Managing Director of 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 the unaudited standalone consolidated finance result for the second quarter and half year ended 30th September 2022. Standalone results and consolidated results are already with you, I will give brief on company product, operating performance and other highlights.

The company sold 1,11,803 ton of plastic goods and achieved net turnover INR2,047 crore during the second quarter of the current year against sale of 1,02,673 ton of plastic goods and achieved net product turnover of INR1,901 crore in the corresponding quarter of previous year achieving volume and product value growth of about 9% and 8% respectively. The company sold INR2,20,725 ton of plastic goods and achieved net product turnover of INR4,216 crore during the first half of the current against sale of 1,73,937 ton and net product turnover of INR3,211 crore in a corresponding half year of previous year, achieving volume and product value growth of about 27% and 21% respectively.

Total consolidated income and operating profit for the second quarter of the current year amounted to INR2,092 crore and INR166 crore and to INR1,932 crore and INR350 crores respectively for the corresponding quarter of the previous year result in an increase of about 8% in consolidated income and decreased about 53% in operating profit. Total consolidated income and operating profit for the half year is the current year amounted to INR4,303 crore and INR493 crore as compared to INR3,279 crore and INR617 crore respectively for the corresponding period of the previous year resulting — about 31% in consolidated income and decreased about 20% in operating profit.

The consolidated profit before tax and profit after tax for the second quarter of the current year amounted to INR105 crore and INR82 crore as compared to INR296 crore and INR229 crore respectively for the corresponding quarter of the previous year result in decrease of 65% and 64% respectively. The consolidated profit before tax and profit after tax for the half year on the current year amounted to INR373 crore and INR296 crore as compared to INR509 crore and INR399 crore respectively for the corresponding period of the previous year resulting decrease of 27% and 26% respectively.

The business 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 as under. Plastic Piping System business grew by 9% in volume and 2% in value term. Packaging Products segment business grew 3% in volume and 18% in value term. Industrial Products segment business grew 19% in volume and 32% in value term. Consumer Product segment business did grew by 8% in volume and grew by 1% in value term.

The Board of Directors has declared interim dividend at 300%, INR6 per share of INR2 each for the financial year is 2022-2023. 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 products increased to INR798 crores during the second quarter of current year as compared to INR758 crore in the corresponding quarter of the previous year, achieving growth of 5%. The Company has total cash surplus of INR493 crore as on 30th 2022 as against cash surplus of INR518 crore as on 31st March 2022.

Business outlook. Plastics Pipe System business profit was severely affected due to continued fall in PVC resin prices in second quarter, which started with effect from April itself. The Company is 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 difficult business situation, the Company’s continuous volume growth in second quarter was quite encouraging. With steep fall in PVC resin prices where PVC prices have dropped by INR55 per kg that means 38% since April of this year augur well for large volume growth in second half of the year, as the system become very affordable.

The Company is fully geared to cater to increase demand of it’s product with increased available capacity by Greenfield project at three location starting from July and shall be operational fully by December this year and also brown field expansion of capacities at other location. The Company expect to achieve 25% plus volume growth in this segment for the year compared to last year business. The Company has introduced Olefins fitting, PEX Piping System in this division which were well received. Further new system are going to be launched during third quarter to augment the range offered to the market.

The business of Cross Laminated Film has started showing improved performance with increase in business of made-up products and penetrating in many export markets. The division has introduced many new made-up products and was successful in expanding its market reach and making breakthrough in three new export markets. The division expects 10% volume growth in this business segment for the year with improved profitability.

In Industrial Component division, business conditions are improving and company expects demand scenario to further improve in sectors of home appliances and white goods which constitutes larger part of this business. Material handling division is continuously expanding its customer base, introducing new product and also investing in new machine and moulds. It would strive to continue enlarge its customer base and product portfolio.

The furniture division has done well during the first half of the year, where it’s turnover has grown from INR159 crore to INR206 crore, with improved profitability and 17% volume growth over corresponding period of previous year. There is a steep price correction in Polypropylene prices, which is a principal raw material during the second quarter leading to de-growth in volume in the second quarter. This will result overall a improved volume and profit for the full year in this division. In Composite LPG Cylinder division, orders are being received 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 received from Indian Oil Corporation Limited. Work on doubling the capacity is progressing and is likely to be operational by December, January — December 2022.

Protective Packaging Division is doing good business in its consumer product, sports goods, yoga mats and kids puzzle and toys. Division is continuously developing and introducing new products for variety of applications. Initial feedback from the market is encouraging and expected to drive the profitability for the division going forward. The division continue to develop various customized solution for the user industry and expect good business for the division. Good growth is witnessed in export markets 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 would soon have all its capacities fully tied up and would require to look for expansion opportunities.

The Company’s CapEx plan for the year 2022-2023 of about INR700 crore including carry forward commitment of INR280 crore is progressing with a little delay from the envisaged schedule. Entire CapEx shall be funded from internal accrual. The prices of different Polymers particularly for polypropylene, Low-density Polyethylene, and Poly Vinyl Chloride have gone down between INR31 per kilo to INR55 per kilo since beginning of the year till now that is a reduction between 21% to 38%.

The whole company is large consumer of PVC Resin which has witnessed the highest fall since April, 2022. This sharp reduction resulted in inventory losses but made products more affordable. Company expect business condition to improve during second half of the year and remain optimistic in various business segment where it operates.

Hence this is a brief and overall summary for the quarter 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 read by all of you. Thank you very much.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Sujit Jain from ASK Investments. Please go ahead.

Sujit Jain — ASK Investments — Analyst

Yes, sir. 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?

M.P. Taparia — Managing Director

Yes, you can safely assume, entirely due to the inventory loss suffered not only in PVC, but partly in LDP and PP.

Sujit Jain — ASK Investments — Analyst

And that is about 7% to 8% of the sales is falling [Speech Overlap] profit margin?

M.P. Taparia — Managing Director

As you seen, our margins have dropped now. Our volumes have gone up, and our overall profit has gone down.

Sujit Jain — ASK Investments — Analyst

Yes, I am saying 8% drop in gross profit margin should be entirely accounted for by the inventory losses.

P. C. Somani — Chief Financial Officer

It could be 8% to 10% also. You see ultimately one cannot precisely count it, but roughly estimate between 8% to 10% of the sale on 2022.

Sujit Jain — ASK Investments — Analyst

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?

M.P. Taparia — Managing Director

That is for the Plastic Piping division for the full year. Last year we saw 2,73,000 ton and this year we anticipate the sell 3,40,000 ton 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 LDPE pipe? It would be High Density Polyethylene Pipe.

Sujit Jain — ASK Investments — Analyst

Okay. And the growth — Sorry?

M.P. Taparia — Managing Director

LDPE pipe, yeah.

Sujit Jain — ASK Investments — Analyst

LDPE pipe. And the growth that you have locked 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 pipes’ growth and as well as application? Does it come from plumbing or did it come from agri?

M.P. Taparia — Managing Director

No, July has a September earning season. In July-September, the demand for agriculture are coming down. So it is mostly from housing and infrastructure.

Sujit Jain — ASK Investments — Analyst

All right. And within that PVC and CPVC if you can just quantify the growth Y-o-Y?

M.P. Taparia — Managing Director

We can share overall our growth in — our share of Plastic Piping is around 80% in PVS System and 20% other polymers which include High Density Polyethylene, Medium and Low-density polyethylene, polypropylene and CPVC.

Sujit Jain — ASK Investments — Analyst

Got that. So what would be the growth in CPVC pipes Y-o-Y volumes.

M.P. Taparia — Managing Director

CPVC pipes in quarter-to-quarter we grew, this quarter we grew by 21% and half yearly we grew by 44%.

Sujit Jain — ASK Investments — Analyst

In CPVC in volumes?

M.P. Taparia — Managing Director

I’m talking volumes.

Sujit Jain — ASK Investments — Analyst

Right. And similar number for PVC?

M.P. Taparia — Managing Director

PVC — [Indecipherable] a polyethylene number also there. We calculate and give you because CPVC question asked so that’s why I was ready, but major [Indecipherable] 80% in PVC.

Sujit Jain — ASK Investments — Analyst

Sir. 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?

M.P. Taparia — Managing Director

July-September demand was weak for furniture, only furniture — furniture demand was weak. As [Indecipherable] so customer were destocking, our distributor destocking.

Sujit Jain — ASK Investments — Analyst

Sure sir. That’s it from my side. All the best.

M.P. Taparia — Managing Director

Thank you.

Operator

Our next question is from the line of Rahul Agarwal from Incred Capital. Please go ahead.

Rahul Agarwal — Incred Capital — Analyst

Yeah, hi, good evening and season’s greetings to everybody who is listening. Sir three questions quickly. Firstly on the PVC price so obviously, it’s down 35% since April when I see the company realization, they’re not down as much like in first half, it looked like 11% to 12% since April. Is this because of sales mix change or is there any other reason to it?

M.P. Taparia — Managing Director

In first quarter there was less sale of plastic, PVC Pipe System other sales was more of other item.

Rahul Agarwal — Incred Capital — Analyst

And how is that deal in second quarter?

M.P. Taparia — Managing Director

Second quarter, the sale of polyethylene pipe system for infrastructure during rainy season demand come down.

Rahul Agarwal — Incred Capital — Analyst

I understand. Sir, 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?

M.P. Taparia — Managing Director

That depend on the market situation, [Indecipherable] with the market situation. And fortunately, in the month of April major demand from the farmers was very good compared to last year. Last year if you recall April, May, the country was affected by COVID second wave and that affected mostly in rural area. So, the demand from retail segment was very weak in last year April and May. This year demand was very robust. So demand very robust, we are not necessarily required to drop the price to the same extent.

Rahul Agarwal — Incred Capital — Analyst

Got it, sir. Sir, second question, a clarification on the guidance you gave 20% volume growth was for the entire company, right?

M.P. Taparia — Managing Director

For the entire company, yes.

Rahul Agarwal — Incred Capital — Analyst

So that implies like a 100% Y-o-Y growth in second half, is that correct? Because you’ve done about 1,70,000 tonnage in first half.

M.P. Taparia — Managing Director

In first chart we showed 2,20,725 ton.

Rahul Agarwal — Incred Capital — Analyst

Right. And full year, we’re talking about 4,70,000, correct?

M.P. Taparia — Managing Director

No, 2,94,000 ton we sold last year. If you calculate 78% it become probably 70,000. So we expect to sell 2,50,000 ton in second half. So, 2,20,000 in first half and 2,50,000 in second half.

Rahul Agarwal — Incred Capital — Analyst

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?

P. C. Somani — Chief Financial Officer

The inventory is actually in mark down naturally, following the accounting principles.

Rahul Agarwal — Incred Capital — Analyst

So incrementally third quarter whatever in case if there is further fall the inventory loss will be restricted to the market prices as of September. Is that correct, sir?

P. C. Somani — Chief Financial Officer

Yes. You’re right.

Rahul Agarwal — Incred Capital — Analyst

Okay. Thank you so much. I’ll come back in the queue.

Operator

Thank you. Our next question is from the line of Abhishek Ghosh from DSP. Please go ahead.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, just till last quarter your volume guidance were 15%. It’s moved up to 20% now. Obviously there is 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?

M.P. Taparia — Managing Director

No, showing good growth in — also furniture — second quarter was weak. Now we are seeing the pressure come down dramatically. So the project becomes more affordable in the lower segment which will give better volume. The demand from all segment demand are looking better because the pricing of polymer will come down in all the polymers.

P. C. Somani — Chief Financial Officer

The [Indecipherable] will now, let people are less commercial product, they will like to buy quality product. So we are seeing better demand prospect now going forward.

Abhishek Ghosh — DSP Mutual Fund — Analyst

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?

P. C. Somani — Chief Financial Officer

Agri demand is going to be superb this year.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Sorry, agri demand will be?

P. C. Somani — Chief Financial Officer

Will be very good this year. For three region. Most of the state they have — dams are full with water. Secondly, the causal income is very affordable. And thirdly the condition of the crops are extremely good today.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, that’s helpful, sir. Sir the other thing is over FY23, you have three greenfield capacities coming through and some brownfield expansion is also coming. So in tonnage terms, how much of overall capacity which will get commissioned in FY23?

M.P. Taparia — Managing Director

Total capital [Indecipherable] 80,000 and this year will get benefit of between — 30,000 ton.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, sir. 87,000 tons capacity increase and 30,000 tons of sale from that. Is it right?

M.P. Taparia — Managing Director

Because the plant restart went after…

Abhishek Ghosh — DSP Mutual Fund — Analyst

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 two years’ time. Is that a fair assumption?

P. C. Somani — Chief Financial Officer

Yeah, it should be better.

M.P. Taparia — Managing Director

Better. 65%, I think.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay. The 65% in 2 years’ time is what the expectation would be from the new capacities, which are coming through.

P. C. Somani — Chief Financial Officer

[Indecipherable] within on year.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Sure, sure.

M.P. Taparia — Managing Director

See we want to — it is possible know.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, great, great. And sir, just one last question. Since you mentioned about this olefin, PEX and all these new range systems that you 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?

M.P. Taparia — Managing Director

This PEX in value added, this olefin in value added so many new product what we are getting is value added. So value added will go on the line and absolute quantum will also grow as we anticipate turnover of INR9,000 crore this year value added percentage also will grow now, value added volume will grow.

Abhishek Ghosh — DSP Mutual Fund — Analyst

Okay, got it. Okay, sir. Thank you so much for answering my questions. I’ll come back in the queue. Thank you so much.

Operator

Thank you. Our next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Yeah, good evening, team and congrats on a good volume performance in a difficult environment. Sir, my first question is, is it possible to share how has been the industry doing in the first half or maybe in the second quarter, especially given the channel has been sitting on a very lean inventory this will give us some sense in terms of how the organized players are doing?

P. C. Somani — Chief Financial Officer

I can give you the overall picture that Reliance has given us information that last year consumed 2.73 million ton of PVC and this year they anticipate may consume 3.26 million tons which is — stage a country may reach the level of 2019-20. 2019-20, our company sold 299,000 ton plastic pipe system. This year we anticipate to sell 350000 ton plastic pipe system. So we anticipate when compared to 2019, 2020 we may grow by around 13% in volume compared to 19-20 pretty far — than the growth in the country which means, our market share once we achieve this percentage what we — convey it to everybody, our market share will increase this year.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay. Very well, explained. This is very helpful. Second, sir, is it possible to share how has been the performance of the Silypoly business and is it still being classified under the value added category?

M.P. Taparia — Managing Director

Silypoly value added category for sure. And now I’ll focus more increasing export and also on major product, that composite cylinder product value added we sell throughout the year. So, getting the volume we are focusing more and there because they are value added require more fabrication capability. So our [Indecipherable] filler market goes up. So we anticipate better profit also and better volume this year.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

And sir, how has been situation of those copy products, which had come in the markets. Have they got exposed? And is there sort of price increase?

M.P. Taparia — Managing Director

They are exposed. Now the product is coming on kilo basis. 150 kilo, 153 kilo basis. There [Indecipherable] that what we were selling now, they can get to selling on kilo basis.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

So, this should help us in terms of improving our pricing power in this segment.

M.P. Taparia — Managing Director

Your — judgement.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay. And sir, lastly, is it possible to share any update on the succession plan, if any?

M.P. Taparia — Managing Director

Thank you very much.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay, sir. Thank you.

Operator

Thank you. Our next question is from the line of Venkatesh Balasubramanian from Axis Capital. Please go ahead.

Venkatesh Balasubramanian — Axis Capital — Analyst

Yes, sir. I had a few questions.

Operator

Sorry. If you’re in a speaker, can you use headset and speak.

Venkatesh Balasubramanian — Axis Capital — Analyst

Yeah. Okay. I had a few questions. The first thing being sir, you had mentioned that at the end of the second quarter, you will actually tell us then 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.

M.P. Taparia — Managing Director

We may take — our material together — our inventory loss maybe around INR250 crore, between INR200 crores to INR250 crore.

Venkatesh Balasubramanian — Axis Capital — Analyst

You said INR250 crores for the first half. Correct?

M.P. Taparia — Managing Director

First half between INR200 crore to INR250 crore.

Venkatesh Balasubramanian — Axis Capital — Analyst

INR200 crores to INR250 crores. Okay. And what about the second quarter of the current year?

M.P. Taparia — Managing Director

Second quarter was a larger portion because these are lean season and frankly it dropped more sharply in the second quarter. It started from the middle of June and continued up to first — continually up to 1 October. So, we had most severe loss in the second quarter.

Bhargav Buddhadev — Kotak Mutual Fund — Analyst

Okay. So, second quarter could be almost INR160 crores to INR180 crores, correct. Am I correct?

M.P. Taparia — Managing Director

No. Very difficult to say.

Venkatesh Balasubramanian — Axis Capital — Analyst

Very difficult to say. Okay. Okay, sir.

M.P. Taparia — Managing Director

Overall We can say — overall correct inventory loss will right thing to tell only in the month of April next year.

Venkatesh Balasubramanian — Axis Capital — Analyst

Okay. Okay, understood. Now, the second question.

M.P. Taparia — Managing Director

We can’t say.

Venkatesh Balasubramanian — Axis Capital — Analyst

Okay. The next question, which I had was, I guess you had there was a management was on TV post the results and had given a guidance — volume growth guidance you already know, but yeah, I was just reconfirming that you mentioned that this year you can do INR9,000 crores of revenues and 12% to 12.5% EBITDA margin. Am I correct?

M.P. Taparia — Managing Director

Yeah, very correct. Correct ratio.

Venkatesh Balasubramanian — Axis Capital — Analyst

Yeah, okay. Lastly, one small tiny little question. Your other expenses in the quarter have gone up quarter-on-quarter by INR16 crores and your power and fuel expenses have gone up by INR9 crores. Can you please explain why this quarter-on-quarter increase has happened in these two items?

P. C. Somani — Chief Financial Officer

Power and fuel because of the volume. If you look at the volume, what we have produced, we are looking volumes sold. If you look at volume produced from the first quarter to second quarter about 14% higher volume we have produced.

Venkatesh Balasubramanian — Axis Capital — Analyst

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?

P. C. Somani — Chief Financial Officer

Other expenses, you see there are certain orders of what you get from the –prices, the fat component because many of the orders now we are getting on prices so your revenue because higher, but then your cost of freight comes into part of expenditure. Especially to only freight and [Indecipherable] publicity which where we are now focusing and processing getting more expenditure.

Venkatesh Balasubramanian — Axis Capital — Analyst

Okay, understood, sir. Thank you for these replies and all the very best for a great second half.

P. C. Somani — Chief Financial Officer

Thank you.

Operator

Thank. Your next question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead.

Sonali Salgaonkar — Jefferies — Analyst

Sir thank you for the opportunity. Sir, my first question is regarding the current demand scenario, especially in construction and 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 feedback — you are getting from the industry right now.

M.P. Taparia — Managing Director

Housing demand is very robust.

Sonali Salgaonkar — Jefferies — Analyst

Got it. Sir, both in rural and as well as urban?

M.P. Taparia — Managing Director

They all equal house.

Sonali Salgaonkar — Jefferies — Analyst

Okay, fair enough. Sir, secondly, could you help us understand what is the PVC trend from 1st 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?

M.P. Taparia — Managing Director

Too many question. And I must tell you that last month the PVC price have fallen by INR7 this month October, they have fallen by INR7 and company gave limited quantity offtake 2 to 4 scheme also. Now the prices have dropped, if I consider the scheme also the prices have dropped to INR61 since 1 April and as on today, INR61 price is dropped. So such a big drop I can’t say the prices will not drop, but it may drop may be INR3, INR4, INR5, after INR61 drop I can’t say it cannot say, it cannot become free. It is already gone from INR140 to INR79.

Sonali Salgaonkar — Jefferies — Analyst

Got it.

M.P. Taparia — Managing Director

So the most case, earlier it was INR70, so worst case it may drop by further INR9 also in the month of November and December. It’s not much room now to drop.

Sonali Salgaonkar — Jefferies — Analyst

Got it, sir. Sir, and my third question is could you help us a with your segment wise capacity right now? And you did mentioned 80,000 metric tons of what you expect as new capacity in FY23. Sir, I’m just…

M.P. Taparia — Managing Director

Yeah.

Sonali Salgaonkar — Jefferies — Analyst

Yeah. Go ahead, sir. Please.

M.P. Taparia — Managing Director

Please continue.

Sonali Salgaonkar — Jefferies — Analyst

Right. Sir you did mentioned 30,000. I’m just a bit confused of that 30,000.

M.P. Taparia — Managing Director

30,000 because 10% — one after another. The plant at — may start by end of December. Plant it was may properly start by end of November. So, we may get three month or four month production. So, that’s why you cannot get more than 30,000 ton this year.

Sonali Salgaonkar — Jefferies — Analyst

Okay.

M.P. Taparia — Managing Director

For this year only.

Sonali Salgaonkar — Jefferies — Analyst

Okay. Got it. Sir, segment wise capacities?

P. C. Somani — Chief Financial Officer

Capacity for the FY23 you want?

Sonali Salgaonkar — Jefferies — Analyst

Yes, sir.

P. C. Somani — Chief Financial Officer

So, Plastic Piping System, it will be close to INR5,80,000. For Industrial Products, it will be close to INR83,000. For Packaging Products, it will be INR90,000 and Consumer product INR30,000.

Sonali Salgaonkar — Jefferies — Analyst

Thank you, sir. That’s it from my side.

Operator

Thank you. Our next question is from the line of Sneha Talreja from Edelweiss. Please go ahead.

Sneha Talreja — Edelweiss — Analyst

Good evening, sir and thanks a lot for the opportunity. Just two questions from my end. Firstly, you spoke about Packaging in the Cross Laminated division where you have spoken about 10% sort of 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.

M.P. Taparia — Managing Director

It was not Cross Laminated segment.

Sneha Talreja — Edelweiss — Analyst

Okay. Sir, any guidance for the Complete Packaging or should we consumer like 20% for the entire company?

M.P. Taparia — Managing Director

I think you just…

P. C. Somani — Chief Financial Officer

The segment as a whole. You can count similarly.

M.P. Taparia — Managing Director

We’ll come back to you.

Sneha Talreja — Edelweiss — Analyst

Sure sir. Secondly, as you were saying PVC prices are almost at the bottom is what you are seeing so the channel already started picking up inventory due to which we have been much better volumes than what we were expecting in Q2?

M.P. Taparia — Managing Director

Repeat the question, please. Sorry. Please read the question, again.

Sneha Talreja — Edelweiss — Analyst

I was asking since you were mentioning the PVC prices have already fallen so much and they are almost at the bottom have the distributor started picking up inventory again and are we seeing pickup in the inventory levels or are they still at the bottom end?

M.P. Taparia — Managing Director

I think we can better reply only in the month of January because this month, on the month of festival earlier it was Dussehra then Diwali and yesterday was — to us. So all big festival are over now. Now, the remaining five months the big festival of Pongal and early, but that doesn’t affect the business. So we can tell you only by end of November, now we will be reaching only in January and we can tell you the demand but normally — commerce I can say now just — we’ll start building inventory properly, like in business sense — both commerce and business sense.

Sneha Talreja — Edelweiss — Analyst

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?

M.P. Taparia — Managing Director

Q2 was 21% for six months it was 44%.

Sneha Talreja — Edelweiss — Analyst

Understood, sir. Thanks a lot, sir and all the very best.

Operator

[Operator Instructions] The next question is from the line of Achal Lohade from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

Yeah, good evening, sir. Thank you for the opportunity. 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 it a significant lag, during the second quarter?

M.P. Taparia — Managing Director

No — we’ll give the price immediately.

Achal Lohade — JM Financial — Analyst

Okay. So what I was curious about, if you look at the Q-o-Q decline in the average PVC price is somewhere around 25%, while in our case the drop seems to be just 10%, 11% this is plastic pipe products. Just wanted to check if there is a significant change in the product mix compared to first quarter?

M.P. Taparia — Managing Director

Once — depends on the particular market situation now — our prices are completely, the whole benefit has gone to the market. Now we can declare today all, entire benefit is gone to the market.

Achal Lohade — JM Financial — Analyst

Right. No, sir. What I was trying to understand is, in terms of the average realization for the quarter for the Plastic Pipe division, its decline about 11% compared to first quarter compared to 24%, 25% drop in the PVC resin price. So the decline in the realization is lower than the PVC price.

M.P. Taparia — Managing Director

Plastic Pipe business contain only PVC, polyethylene pipe and by regional low density product to be it a polypropylene pipes system — CPVC pipe systems. So there many system go into plastic pipe system. See not only PVC pipe system.

Achal Lohade — JM Financial — Analyst

Right, okay. So you mean it’s to do with the product mix that the drop in the realization is not as much as the PVC price realization decline. Is that a fair assessment?

M.P. Taparia — Managing Director

Our Plastic Pipe System is not 100% only PVC system.

Achal Lohade — JM Financial — Analyst

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?

M.P. Taparia — Managing Director

Do your calculation, and we are not making only Plastic Pipe system. We make many product. Then 12% and 12.5% basically for the entire company.

Achal Lohade — JM Financial — Analyst

Understood. I’ll come back in the queue, sir. Thank you so much.

Operator

Thank you. Our next question is from the line of Rushabh Shah from Anubhuti Advisors. Please go ahead.

Rushabh Shah — Anubhuti Advisors — Analyst

Thank you for the opportunity. Sir, my question was pertaining to our other listed entity Supreme Petrochem. So can you give some operational highlights on the same, and again I think volume guidance for the entire FY23?

M.P. Taparia — Managing Director

No, basically, yeah great to inform that our — plan to increase our capacity of polystyrene and also — our EPS are very well established. We are all waiting for consent to approval from Government of Maharashtra and we are also expanding our capacity at Manali plant. So overall, 12000 ton of polystyrene and expanded polystyrene capacity will be ready to start running from the month of November this year, next month only. Subject to getting the department’s consent yet to operate. To the bank most detailed project first we recall the permission from Pollution Board consent to establish, based on the permission then you go ahead to establish the capacity after the campus is established then we approach them again to give us consent to operate.

So, somehow their meeting did not take place due to festival in this month. We hope sometime the meeting will take place next week — next month and then we get consent to operate from them then our capacity will go up by around 10,000 ton per month from both the plant to we run.

And the [Indecipherable] plant is also shaping up well. So, our CapEx plan are going quite well and our product are very well received and we are selling our volume not only Indian market, but we are exporting also. There indeed fall in the price — raw material which resulted in a profit in the second quarter but — consol looking quite favorable.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay. Okay. So, until now, we are almost running at 100% capacity. So of incremental volume will only be possible once the new capacity come online. Am I correct?

Aasim Bharde — DAM Capital — Analyst

You are right.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay. And just secondly on the polystyrene prices. So, we believe recently, there has been I think correction in the prices alongside crude prices. So, how are the prices currently trending?

M.P. Taparia — Managing Director

Nothing to do with the crude. We don’t make polystyrene from crude. We make polystyrene from styrene monomer.

Rushabh Shah — Anubhuti Advisors — Analyst

Styrene monomer. Absolutely correct. But how are the prices?

M.P. Taparia — Managing Director

12% — we took the price.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay. Okay. Okay. Currently any new capacity coming online in other countries? Just wanted to check on how the whole scenario is working on polystyrene prices.

M.P. Taparia — Managing Director

We don’t sure. We maintain our margins and we have no problem. Indian market also growing, we have no problem.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay. Okay. So, second half, we can expect, again I think margins will normalize and maybe we can see the 1Q level margins again from — is picking up?

M.P. Taparia — Managing Director

The price dropped from $1,500 in the month of June to $950.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay.

M.P. Taparia — Managing Director

One week before.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay.

M.P. Taparia — Managing Director

October price have drop to $950 from $1,500 in the month of June. And price will drop — we drop the price — also.

Rushabh Shah — Anubhuti Advisors — Analyst

Understood, understood. So currently prices are in the north of somewhere $900, correct?

M.P. Taparia — Managing Director

No, no, no. Today around $1,000.

Operator

Mr. Shah may we request you to return to the queue. There are several participants waiting for their turn, sir.

Rushabh Shah — Anubhuti Advisors — Analyst

Okay. Perfect for the opportunity.

Operator

We’ll take our next question from the line of Utkarsh Nopany from Haitong Securities, please go ahead.

Utkarsh Nopany — Haitong Securities — Analyst

Yeah. Hi, good evening, sir. Sir, first thing on the pipe volume front, we have guided that we are expecting our pipe segment volume to grow at 25% rate for FY23. So, this implies that pipe segment volume is likely to grow at around 4.5% CAGR in the second half of FY23 over second half of FY19. So just wanted to understand from you, sir why we are expecting such muted pipe volume growth for the second half of FY23 sir? Then we are expecting a pretty positive demand outlook from both Agri and the plumbing side, sir?

P. C. Somani — Chief Financial Officer

Second half comparing, so last year second half how much we had?

Utkarsh Nopany — Haitong Securities — Analyst

Sir, I’m comparing second half of FY19 versus second half of FY23, sir.

M.P. Taparia — Managing Director

FY19 we can’t share. I can’t share FY19 today — FY19 overall we will grow 25% plus.

Utkarsh Nopany — Haitong Securities — Analyst

Okay, sir. Sir second question is on the margin front, like see our Packaging segment margin they’re at a multi year low level in this quarter. Just want your sense on the guidance front, for the second half of FY23 and FY24, what kind of margin we are looking at for the Packaging segment sir?

M.P. Taparia — Managing Director

The price erosion in LGP — we use it for our Protective Packaging low density polyethylene where the price has dropped very substantially. So there are component inventory loss also, but now the price has — say immediately to comparable.

Utkarsh Nopany — Haitong Securities — Analyst

Sir, earlier we were doing around — performance down [Speech Overlap] Pardon sir?

M.P. Taparia — Managing Director

Overall we anticipate profit to the company this year between 12% to 12.5%.

Utkarsh Nopany — Haitong Securities — Analyst

Sir, we got this point sir for the Packaging segment specifically, can we expect our margin to improve back again to 18% to 20% which we doing earlier, sir once the resin prices stabilize.

M.P. Taparia — Managing Director

18%, 20% in Packaging segment.

P. C. Somani — Chief Financial Officer

Earlier, when Silpoly was at the…

M.P. Taparia — Managing Director

No only Silpoly.

P. C. Somani — Chief Financial Officer

Silpoly, overall packaging so it should be between 15% to 17%, you see ultimately — competition market is — market competition is increasing so what prices are taken place you cannot restore everything to back to the normal level.

Utkarsh Nopany — Haitong Securities — Analyst

Okay. And sir, like at the company level we earlier guided two quarter back that we are looking at 16% EBITDA margin on a steady state basis. So, once the resin prices stabilizes can we look at maintaining 16% EBITDA margin at a company level say from FY24 onwards?

M.P. Taparia — Managing Director

We got 15% if I remember 15% to 15.5% we told you in the month of April I think injection — [Speech Overlap] Please.

Utkarsh Nopany — Haitong Securities — Analyst

Okay. And sir, lastly on the CapEx front, we have spent INR237 crore in the first half. How much amount we are planning to spend in the second half, sir?

P. C. Somani — Chief Financial Officer

From the cash outflow 237 crores, the cash outflow, which we made this year, similar cash outflow around INR250 crore from cash outflow point of view.

Utkarsh Nopany — Haitong Securities — Analyst

Okay. Thanks a lot, sir.

Operator

Thank you. Our next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Yeah, hi, sir, good evening. Am I audible?

M.P. Taparia — Managing Director

Yeah. You really audible. Yes please.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Sir you mentioned earlier in the call that the inventory losses are close to 10% of INR2000 crore, which I assume was for Q2. Later in the call, you mentioned the INR200 crore inventory losses for the H1. Can you rectify please?

P. C. Somani — Chief Financial Officer

Mentioned between INR200 crores and INR250 crores which is very difficult to quantify. This is why the answer was given in the range between INR200 crores and INR250 crore.

Rajesh Kumar Ravi — HDFC Securities — Analyst

But that is you mentioned 10% of INR2000 crores. So that was pertaining to second quarter, is that understanding, right?

P. C. Somani — Chief Financial Officer

Yes, yes. Right.

Rajesh Kumar Ravi — HDFC Securities — Analyst

So if I look between Q1 and Q2 March end to June end, June end to September end price fall between these two points is close to INR25 to INR30 in each of the quarters. So if in second quarter on a INR25…

P. C. Somani — Chief Financial Officer

The second quarter, but from the loss we had also marked down the inventory to the marketplace.

Rajesh Kumar Ravi — HDFC Securities — Analyst

But in Q1, you did not do it?

P. C. Somani — Chief Financial Officer

There was a sufficient gap between the cost and the selling price. Majority of the losses coming into Q2.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Majority of the losses going into Q2 numbers. Okay. And now you mentioned that we have seen INR8 further fall in October from September end?

M.P. Taparia — Managing Director

There were INR7 drop in the price and the company gave scheme of INR2 to INR4. So I cannot give the — probably reduction — it was a fall in the price itself, We’ve got full INR4 scheme then the drop even in the month of October.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. So, if prices do not pick up would we be having further losses to the tune of 2% to 3% of topline in this quarter?

M.P. Taparia — Managing Director

Hey friend you can’t forecast so many thing but we have given a forecast, at — we will 12%, 12.5%.

Rajesh Kumar Ravi — HDFC Securities — Analyst

That is okay. Well taken, sir, I’m just saying on — if the situation remains status quo then 2% to 3%…

M.P. Taparia — Managing Director

Nobody — go above here.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay, sir. And secondly on the realization trend, if I look at on a quarter-on-quarter basis on the resins pipe realization has fallen around 11%. The other segments have reported just 2% to 3% realization drop Q-on-Q. Could you explain that, because the resin prices that have fallen broadly is in a similar range across the other segments?

P. C. Somani — Chief Financial Officer

See the product mix, like Industrial product the competition is doing very well. Similarly, the consumer product we are doing more and more business of the — very high return. It is a product mix of the respected division which is holding on to the overall realization.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. And earlier in the call, you were giving the breakup segment. So, could you repeat the segmental capacity breakup September end? And this is the 80,000 expansion. Sir what will be the segmental capacity at March end?

P. C. Somani — Chief Financial Officer

No, I have given March end capacity segmental what I have given, last year– 580,000 because of as of March, ’23 which would be after the — there are two plants, which are there, we’ll go into operation. Industrial Products 83,000. Packaging Products 90,000 and Consumer Products 30,000.

Rajesh Kumar Ravi — HDFC Securities — Analyst

So this is a 60,000 — versus FY22 is what I have 525…

P. C. Somani — Chief Financial Officer

What has happened certain capacity, we have transferred from our rest of Maharashtra plant to reallocate some place additional capacities. There is 60, 000, 65,000.

Rajesh Kumar Ravi — HDFC Securities — Analyst

So are expecting 50% incremental 50% of the volume from these capacities will be affected in this year itself. 60,000 increase and 30,000 volume contribution from these capacity?

P. C. Somani — Chief Financial Officer

Capacity of Maharashtra plant was already in operation.

Operator

I’m sorry to interrupt, Mr. Rajesh Kumar Ravi. Could you please return to the queue. There are several participants waiting for their turn.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Sure.

Operator

Appreciate it. Thank you. We’ll take our next question from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, two questions. First, can you detail our incremental product pipeline there are several new launches? If you can specifically sight some details on one is on Biofloc, second is Specs and the third is basically the Bath division. Sir, that’s the first question.

M.P. Taparia — Managing Director

What is first one?

P. C. Somani — Chief Financial Officer

Biofloc.

Ritesh Shah — Investec — Analyst

Sir, Biofloc.

M.P. Taparia — Managing Director

Biofloc, we have dropped. Remember, we closed — we have made sharp launch just to test the market and we felt the product is not adding value to the customer. So, we sold only 11 pieces of Biofloc at that time, and then now we don’t sell the product.

Operator

Thank you. We’ll take our next question from the line of Chirag Lodaya from Valuequest. Please go ahead.

Chirag Lodaya — Valuequest — Analyst

Yeah. Thank you for the opportunity. I just have one question. Sir, I just wanted to know what is the reason of PVC prices going down further. So earlier the reason was lot of dumping from China. But what we are hearing currently is lot of shipment for December delivery from US are coming at much lower prices. So, just wanted to get your sense what exactly is happening global market?

M.P. Taparia — Managing Director

There are two reasons. There is a big drop in demand in housing construction in USA due to continuous increase in interest cost. The Government of USA is very concerned about the inflation. So, going on increasing the rate of interest they may increase rate of interest again on second and reason, the housing demand is poor and around 80% of PVC by — pipe or profile or cable are consumed in housing requirement.

See the housing demand goes down and the huge increase in the price of caustic soda, because of this they are able to get chlorine at a negative price and –whenever we have to make a very low cost and share the excess capacity in the world market. So today, the lowest supplier is USA and because of them only the price has dropped much more than what was expected earlier.

Operator

Thank you. We’ll take our next question from the line of Mohammed, an Individual Investor. Mohammed, your line is unmuted. Could you please go ahead with your question.

Mohammed — — Analyst

Hello?

Operator

You may ask your question sir.

Mohammed — — Analyst

Sir this is regarding Supreme Petrochem, sir once the — by when can we ramp up the capacity to like full utilization right now for the existing capacity?

M.P. Taparia — Managing Director

Supreme Petrochem better you ask question to Supreme Petrochem, Mr. Nayyar please

Operator

Thank you. Our next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.

Vipul Shah — Sumangal Investments — Analyst

Hi, sir. Can you give more information regarding this PEX pipes, what are it’s applications? And what is the value addition we are getting as compared to normal PVC pipe?

M.P. Taparia — Managing Director

It’s quite expensive pipe system for — ground water far better than CPVC pipe system, but much more expensive CPVC system because material also very expensive.

Vipul Shah — Sumangal Investments — Analyst

So can you quantify how expensive it is as compared to CPVC?

M.P. Taparia — Managing Director

70%, 80% more.

Vipul Shah — Sumangal Investments — Analyst

70, 80% more than CPVC, right sir.

M.P. Taparia — Managing Director

Any bottom side it will cost 70% to 80% more.

Vipul Shah — Sumangal Investments — Analyst

Okay. Okay. Thank you.

Operator

Thank you. Our next question is from the line of Karan Bhatelia from Asian Market Securities, please go ahead.

Karan Bhatelia — Asian Market Securities — Analyst

Hi, thank you for the opportunity. Sir while we see the sharp decline in the PVC prices in last 6 months, how is the pricing behavior in CPVC market?

M.P. Taparia — Managing Director

CPVC prices holding steady as on today.

Karan Bhatelia — Asian Market Securities — Analyst

Hello?

M.P. Taparia — Managing Director

Yeah the holding steady on today.

Karan Bhatelia — Asian Market Securities — Analyst

And for last 6 months what was the increase approximately?

M.P. Taparia — Managing Director

There demand is steady. There no increase also they are holding steady.

Karan Bhatelia — Asian Market Securities — Analyst

And the outlook there is stable or we can see some correction on this?

M.P. Taparia — Managing Director

Sorry?

Karan Bhatelia — Asian Market Securities — Analyst

And for the coming year, we expect some correction in CPVC or we expect them to be stable?

M.P. Taparia — Managing Director

Polymer, I can’t give you forecast right now.

Karan Bhatelia — Asian Market Securities — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Sir. My question was pertaining to the new product launches. I think you touched upon by Bioflock and you touched upon Specs. Sir any incremental color on Bath division basically, how much is the segment doing right now? What are the targets? That was one question.

M.P. Taparia — Managing Director

Bath division doing very well. You touched — information how much we’re selling, but our business is picking up very much. We have 230 varieties of bath fitting range and we are adding more and more variety.

Ritesh Shah — Investec — Analyst

Okay. And sir my second question was just from understanding standpoint when we set Packaging, Industrial and Consumer Products, what are the kind of polymers that we process over here? Is it largely HDPE and LDPE or there other polymers also over here?

M.P. Taparia — Managing Director

Other polymer also which are very, very expensive polymer which are added to polystyrene.

Ritesh Shah — Investec — Analyst

Sir, I didn’t get the answer. I couldn’t understand.

M.P. Taparia — Managing Director

We are adding to other polymer also along with polystyrene.

Ritesh Shah — Investec — Analyst

Okay. Okay, sir. My question was, if we look at HDPE and LDPE prices on a sequential basis that has declined by 17% and 18%, but if, look at the realization decline it just 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 — 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?

M.P. Taparia — Managing Director

Both the region. Product mix and mix of polymers.

Ritesh Shah — Investec — Analyst

Okay. Fine sir. Thank you so much. I’ll jump back in queue.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.

M.P. Taparia — Managing Director

Thank you all the participants for their very — questions. We thank all of them. Thank you very much and wish you well happy healthy and prosperous New Year.

Operator

[Operator Closing Remarks]