Astral Ltd – known for PVC and CPVC pipes – is expecting volume recovery in Q4FY22 (January – March) to last year’s levels as impact of Omicron-led disruptions normalise and an upward trend in polymer prices becomes visible. Price hikes are expected to be initiated again in March to the tune of 3 per cent-odd.

Astral’s sales volumes witnessed a dip in Q3FY22 – down 4.45 per cent y-o-y – on extended rains, construction curbs, extended Diwali celebrations and slower off-take in November. Rising Omicron cases also slowed down January numbers.

During last quarter, trade was de-stocking materials anticipating fall in polymer prices. Typically, a fall in polymer prices means dealers and traders try to liquidate their higher priced offerings and look to buy during the lower price cycle.

Volume growth decline

Industry saw a double digit decline in volume.

“Volume growth was tepid at the industry level,” Kairav Engineer, VP, Business Development, Astral Ltd, told BusinessLine, adding that volatility in raw material costs may continue, making it harder to predict the next quarter’s margins.

In January, polymer prices have improved by ₹2 per kilogram; as against the ₹9 per kilogram decline, a-month-ago.

“We are expecting an upcycle in polymer prices which will aid volume recovery. The current trends point to such a possibility at the moment. We do not expect polymer prices to be at historic highs as they were previously. But there will be raw material price volatility for at least another 6 – 12 months. Factors like international supply and government curbs because of Covid will play a role in price movement,” Engineer said adding that the company has already seen one month of disruptions because of increased Covid cases in India.

“If the current demand uptrend continues to be as good as it is at the moment, then we will definitely be up to last year’s March levels. We have a high base effect there , since there was no Covid-led disruptions in Q4FY21 and prices were firm,” he added.

Demand is currently being driven by real estate and construction segment including the Centre’s push for flagship projects like ‘Nal Se Jal’ and Prime Minister Awas Yojana (both rural and urban).

Price hikes

According to Engineer, the company is looking at 3 per cent hike in prices across CPVC and PVC offerings , which may come into effect from March 1. A 5 per cent price hike was announced in January, which came into effect in February.

“In all, you will see an 8 per cent-odd price hike, this quarter, primarily because of raw material price volatility. Price hikes will help us protect margins,” he said.

Incidentally, 40 per cent of India’s polymer requirements are met locally, while 60 per cent is import dependent. In case of Astral, nearly 100 per cent of its CPVC requirements are met through imports; while a chunk of its PVC requirements are met from local sourcing, primarily via Reliance.

In Q3FY22, maximum sales for the company came from CPVC pipes that are 30 per cent lighter in weight and have better margins compared to PVC ones.

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