Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Supreme Industries Ltd (BOM:509930, Financial) achieved a 17% volume growth and a 12% net product turnover growth in Q1 FY25 compared to the previous year.
- The company reported a 24% increase in operating profit and a 27% increase in profit after tax year-over-year.
- The plastic piping system business grew by 20% in volume and 14% in value terms.
- The company has a total cash surplus of INR1,245 crores as of June 30, 2024.
- Various capacity expansion programs are progressing smoothly, with new greenfield projects and additional land acquisitions in multiple locations.
Negative Points
- June was a weak month for growth, impacting the overall quarterly performance.
- There was a spike in PVC Resin prices by around INR13 per kilo, which affected margins.
- The EBIT margins for the packaging segment have been volatile over the last five quarters.
- The company faces competitive pressure, with some competitors accusing Supreme Industries Ltd of aggressively cutting prices.
- Inventory levels at the distributor level are low, which may impact restocking and volume growth in the short term.
Q & A Highlights
Q: Did you have any inventory gain or loss in the current quarter? Why was June a bad month for growth?
A: June saw a significant increase in PVC resin prices by around INR 13 per kilo, leading to cautious purchasing behavior from customers. This impacted volume growth, which was robust in the first two months but slowed in June.
Q: Given the weak performance in June and July, do you still expect to achieve 25% volume growth for the full year?
A: Yes, we maintain our guidance of 25% volume growth for the plastic piping division and 20% overall for the company.
Q: Are there any changes to your 15.5% margin guidance?
A: No, we are maintaining our margin guidance at 15.5%.
Q: What is the outlook for the packaging segment, given its volatile EBIT margins?
A: The volatility is due to product mix and demand fluctuations. However, we are seeing positive results from our strategy to focus on fabricated products and expand our geographical reach.
Q: Can you provide more details on your CapEx plans for fiscal 2025?
A: We have committed around INR 1,500 crores for CapEx, which will be funded from internal accruals. This includes capacity expansions and new greenfield projects.
Q: How is the company performing in the Nal se Jal project?
A: The revenue contribution from Nal se Jal was less than 2% for Q1. We expect more significant contributions once new funds are allocated.
Q: What is the status of your greenfield projects and capacity expansions?
A: Various greenfield projects are progressing well. We expect to reach an installed capacity of 835,000 tonnes per annum for the piping system division by the end of fiscal year 2025.
Q: How are you addressing competitive pressures in the market?
A: We are focusing on value-added products and expanding our product range. Our strategy includes aggressive pricing to capture market share while maintaining our margin guidance.
Q: What are your expectations for the CPVC pipe segment?
A: CPVC pipe volumes grew by more than 40% in the current quarter. We expect this segment to continue performing well.
Q: How do you see the industry evolving, and what are your growth drivers?
A: We expect the industry to grow by 10-15%. Our growth drivers include increased demand from housing, infrastructure, and agriculture sectors, supported by our capacity expansions and new product launches.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
