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Chemplast Sanmar sets great store by ‘custom manufacturing’ — producing what a customer asks for – and plans to spend ₹680 crore in sprucing up its Custom Manufactured Chemicals (CMC) Division. The capex programme is spread over the next 15 months with a cash balance of ₹1,160 crore.
This was the central message of the company delivered through an investor presentation that accompanied its October-December 2022 quarter financial results.
Chemplast Sanmar’s primary product is PVC resin, which accounts for 60 per cent of its sales, but it also manufactures a range of chemicals such as caustic soda, chloromethanes and hydrogen peroxide.
Custom manufacturing
But Chemplast is giving a thrust to ‘custom manufacturing’, expanding its 1,068 tonnes per annum plant at Berigai, near Krishnagiri, Tamil Nadu. This plant produces whatever chemicals the customer asks for in the areas of agrochemicals, pharmaceuticals and fine chemicals. Its capabilities include “a range of chemistries” such as cyanation, hydrogenation and liquid purification.
The company believes that custom manufacturing has “significant entry barriers”, such as approvals by customers and expectations from customers of process innovation and cost reduction.
In a press release issued on Saturday, Chemplast Sanmar’s Managing Director, Ramkumar Shankar, said the company had “received confirmation from one of our customers” that it had been selected for the supply of an ‘advanced intermediate’.
“Based on this development, along with the announcement in the previous quarter on the signing of an LOI for another intermediate, and a healthy pipeline of products, we plan to kick-start the next phase of expansion of the multi-purpose facility immediately,” the release said.
Rising energy costs hit Q3 profits
Chemplast Sanmar has reported an 89 per cent fall in its net profit for the October-December quarter of 2022, compared with the corresponding quarter of 2021 — to ₹27 crore from ₹237 crore — even though turnover fell only 18 per cent to ₹1,189 crore from ₹1,452 crore.
The company attributes this to “headwinds for most part of the quarter”. Falling prices of finished goods coupled with increase in energy costs, which went up by ₹37 crore during the quarter, impacted profits. A revival of PVC prices came only in the end of December, the release said.
PVC prices on rise
The situation for the PVC segment is turning favourable again, driven by robust domestic demand and China re-opening, it said.
PVC prices have started moving upwards after nine months of falling prices, channel inventory has dried up and volume off-take is back to normal.
We expect the demand in FY23 for Suspension PVC in India to touch the pre-pandemic levels of 3.3 million tonnes, a 16-17 per cent growth over FY22. Overall, with recovery in PVC prices and healthy demand trends, we expect our Q4 FY23 performance to return to a growth trajectory,” Shankar said in the press release.
On the NSE on Friday, the Chemplast Sanmar share, of face value of ₹5, ended at ₹432.25, which was ₹1.55 (0.36 per cent) lower than the previous close.
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