Chemplast Sanmar Ltd reported a consolidated net loss of Rs 64 crore in the June 2023 quarter, as against a consolidated net profit of Rs 41 crore in the June 2022 quarter. A steep fall in prices and dumping from China hit the bottomline of the specialty chemicals manufacturer in the first quarter.
With prices of both suspension and speciality paste PVC dropping to their lowest level over the last 8-10 quarters, Q1FY24 was one the toughest quarters in recent times for Chemplast and the PVC industry as a whole. Prices fell 10 per cent on a sequential basis.
“This is due mainly to sluggish global demand and excessive dumping from China,” said Ramkumar Shankar, Managing Director, adding, “However, domestic demand for Suspension PVC and Speciality Paste PVC was strong through the quarter, with an increase in volumes both on a year-on-year and sequential basis.
The other chemicals (caustic soda, chloromethanes, hydrogen peroxide, Ref. gases) business also witnessed pricing pressures due to a combination of factors, including weak demand, excess supply due to recent capacity additions, and the global slowdown. These headwinds are likely to continue for a couple of quarters.
Amid challenges in most businesses, its custom-manufactured chemicals division continued to perform well and is expected to achieve higher than projected revenue growth.
Consolidated revenue from operations was lower at Rs 996 crore, compared with Rs 1,411 crore in the year-ago quarter. The company reported a negative EBITDA of Rs 35 crore, as against a positive EBITDA of Rs 194 crore.
Meanwhile, suspension and speciality paste PVC prices started recovering in July due mainly to strong domestic demand, combined with a fall in import arrivals in the latter part of Q1FY24, consequent to the reduction in operating rates of PVC plants in North-East Asia.
“The outlook for the PVC business is improving again, driven by strong domestic demand, a recovery in prices on account of a fall in import arrivals in the country, and a reduction in feedstock prices. These factors, coupled with softening energy costs, augur well for us and we expect better margins from Q2 onwards,” said Shankar.
The company has completed Phase 1 of the new multi-purpose block in the custom manufacturing business, with an investment of about Rs 300 crore.
“This block was safely constructed in record time and demonstrates Chemplast Sanmar’s ability to build and bring on-stream a multi-purpose production facility that meets the highest global standards,” said Vijay Sankar, Chairman.
With 2 LoIs in place and a strong pipeline of other products, the company expects to achieve peak capacity utilisation in the next two-three years.