Chemplast Sanmar Limited, a specialty chemicals company, which is India’s dominant producer of Specialty Paste PVC, having significant presence in the custom manufacturing business and through its wholly- owned subsidiary, is the 2nd largest producer of Suspension PVC in India, has shown a revenue growth of 47% in Q1 FY23 to reach Rs. 1,411 crore and profit growth of 41% to reach Rs. 41 crore. 

PVC prices have come under pressure due to oversupply from China. This is temporary and is caused by the lockdowns in China and the medium to long term outlook remains strong.

The non-Specialty Chemicals segment registered an 94% increase in the revenues on YoY basis, mainly led by surge on the pricing front especially for Caustic Soda. Suspension PVC witnessed an increase of 42% in the overall revenues on a YoY basis driven by a 40% increase in the sales volumes. A part of higher volumes is due to completion of debottlenecking in May ’22.

Finance cost for the quarter has been reduced to Rs. 36 crore as compared to Rs. 100 crore in Q1 FY22. This is largely driven by lower debt compared to the corresponding period last year.

Commenting on the results, Ramkumar Shankar, Managing Director said, “Despite a challenging environment, we delivered another quarter with a strong 47% growth in revenues on a YoY basis and 28% growth in EBITDA on YoY basis. Sequentially however, our profits are lower than Q4 of FY22 due to the flood of PVC exports from China into India due to the COVID-related lockdowns in that country. Energy costs have also gone up, largely due to a spike in coal and natural gas prices. I’d like to highlight that currently, commodity business dominates our sales pie with close to 65% of our sales. However, in terms of profitability our specialty vehicle accounts for more than 50% of our EBITDA. In the long term, once our proposed expansions come on-stream, specialty vehicles would contribute a larger share of both revenues and profitability.”

“In the quarter gone by, we commissioned the first of our multiple Capex projects which we announced at the time of our IPO – the debottlenecking of our suspension PVC capacity at our Cuddalore plant. This may be a small project but its timely completion in spite of COVID-19 related disruptions reflects our commitment towards growth and strong project execution capabilities. Approvals have been received and construction started on both the Paste PVC project and the new multi-purpose block in the CMC business,” commented Shankar.

“On the pricing front, PVC prices have come under pressure as the lockdowns in China have had an impact on consumption centres whereas the production centres were un-impacted. As a result, excess PVC inventory that is being built up in China is being exported out of China and that is keeping the prices low across the region. However, feedstock prices have also come down quite significantly following this, and indeed on a marginal basis, the spreads between PVC and VCM are still healthy. This will be realized when the prices stabilize. This flood of Chinese exports is a temporary phenomenon linked to their lockdowns, and we are confident that things will normalize over the next couple of months. Caustic soda prices continue to be strong,” said Shankar.

“The demand environment across our product portfolio continues to remain strong. The medium to long- term prospects for our products are positive, with demand growth estimated to outpace growth in supply,” added Shankar.

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