Specialty chemical company Chemplast Sanmar announced Q2FY23 results: Q2FY23 & H1FY23: Feedstock (EDC and VCM) prices have also dropped, albeit with a lag. The benefit will however be realized only once the PVC prices stabilize; expect these to stabilise by the end of Q3 Volumes are back to normal - Volumes of all products witnessed an increase in H1FY23 compared to the volumes in the corresponding period last year Custom Manufacturing business continued to see healthy demand in Q2FY23 In Q2FY23, Other Chemicals delivered a 37% increase in revenues on a YoY basis, primarily led by growth in terms of both volumes and prices of Caustic The cost of Power and Fuel increased by Rs 132 crore and Rs 61 crore compared to H1 and Q2 of FY22, respectively. This is mainly attributed to increasing in coal and natural gas prices In H1FY23, the company spent Rs 115 crore for capex. Both the Paste PVC and Custom Manufacturing expansion projects are on track With a healthy cash balance of Rs 1,400 crore, the company continues to be net cash positive on a consolidated basis Commenting on the results, Mr. Ramkumar Shankar, Managing Director, said, “The unique situation that the PVC industry is experiencing continued through this quarter. Our business continued to face headwinds in Q2 FY’23 as well due to the zero-COVID policies in China, rising energy costs due to the Russia-Ukraine war and overall inflationary pressures. Chinese shutdowns related to zero-COVID policies led to inventory build up in China and continuous dumping into India, though some reduction has been witnessed in the last couple of months. With our strong balance sheet and portfolio of products, we have been able to fare reasonably well in this extremely tough situation. We closed the first half of the fiscal with a flat top-line and a double digit EBITDA margin of 11%. Falling prices of finished goods coupled with increase in energy costs have resulted in reduction of margins. We believe that both Paste PVC and Suspension PVC prices are nearing the bottom and with lower feedstock price, we expect to see an upturn from Q4-FY’23 onwards. Based on current trends, Custom Manufacturing business is expected to grow at ~30% in FY'23. Recently, we have signed a Letter of Intent with a global innovator to supply an advanced intermediate for a recently launched active ingredient. To cater to the additional volumes of Custom Manufacturing business, we plan to increase the capacity in Phase 1 itself and fast track the expansion. We expect to achieve significant growth in this segment in the coming years. Caustic Soda prices continue to remain healthy. Demand for Chloromethanes is also steady. There have been a few capacity additions recently which could have a temporary impact on prices. However, we expect the prices to recover once the market absorbs the additional quantities. Hydrogen peroxide demand increased on the back of improved demand from paper industry; the outlook remains positive with rising prices due to the tightness in the natural gas availability impacting supply in the region. Energy costs continue to remain high, with coal and natural gas prices on an upward trend. Both our capex projects are on track and slated to meet expected timelines.” Result PDF
Conference Call with Chemplast Sanmar Management and Analysts on Q2FY23 Performance and Outlook. Listen to the full earnings transcript.
Conference Call with Chemplast Sanmar Management and Analysts on Q4FY22 Performance and Outlook. Listen to the full earnings transcript.