Chemplast Sanmar reports net loss of Rs 64 cr in Q1

CHENNAI: Specialty chemicals major Chemplast Sanmar has recorded a consolidated net loss of Rs 64 crore in the June 2023 quarter, compared to a consolidated net profit of Rs 41 crore in the June 2022 quarter.

The second largest producer of suspension PVC in India (through its wholly-owned subsidiary) attributed dumping in China and sluggish global demand for the company’s performance.

Ramkumar Shankar, MD, said, “With prices of both suspension and speciality paste PVC being at the lowest level over the last 8-10 quarters, Q1 FY’24 has been one of the toughest quarters in recent times for Chemplast and the PVC industry as a whole. This is mainly due to the sluggishness in demand globally and the excessive dumping from China. However, the domestic demand for suspension PVC and speciality paste PVC was strong through the quarter with increase in volumes both on y-o-y and sequential basis.”

Noting that the outlook for the PVC business is improving again, he said “driven by the strong domestic demand, recovery in prices on account of fall in import arrivals into the country and reduction in feedstock prices. These factors, coupled with the softening energy costs, augur well for us and we expect better margins from Q2 onwards.”

The company’s consolidated revenue was lower at Rs 996 crore against Rs 1,411 crore in the quarter of the previous year. It reported a negative EBITDA of Rs 35 crore, as against a positive EBITDA of Rs 194 crore.

Shankar said other chemicals (caustic soda, chloromethanes, hydrogen peroxide, ref gases) business also saw significant pricing pressures due to a combination of factors including weak demand, excess supply situation in India owing to recent capacity additions and the global slowdown. “These headwinds are likely to continue for a couple of quarters,” he said.

But the positive point, he sought to highlight, was despite this tough environment, “our custom manufactured chemicals division continued to perform well and is on track to achieve over 25% revenue growth during the year as against the 10%-15% guidance given earlier. We have completed Phase 1 of the new multi-purpose block in a timely manner with an investment of around Rs 300 cr. With 2 LOIs in place and a strong pipeline of other products, we expect this capacity to reach peak utilisation in the next 2-3 years.”

He went on to add the 41 ktpa speciality paste PVC and Phase 2 of the custom manufacturing expansion projects were on track and slated to meet expected timelines. “While there are immediate-term challenges, we are confident of all our businesses’ prospects in the medium to long term” he said.