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India’s Chemplast Sanmar commences production at new paste PVC plant in Cuddalore

04 Mar 2024 18:28 IST
India’s Chemplast Sanmar Ltd, a major manufacturer of PVC resins, chlorochemicals, and piping systems, announced the commencement of commercial production at its new specialty paste PVC (polyvinyl chloride) resin facility in Cuddalore, Tamil Nadu. This new 41,000 tonnes per annum (TPA) production will increase the company’s total past PVC resin output capacity to 110,000 TPA.

The new specialty paste PVC resin manufacturing facility was set up at an investment of Rs 360 crore (US$43 million) at SIPCOT Industrial Complex, Semmankuppam village, Cuddalore. The company also enjoys another specialty paste PVC plant at Mettur with a production capacity of 66,000 TPA. “Ramkumar Shankar, Managing Director of Chemplast Sanmar Ltd, stated in an interview, “The commencement of new specialty paste PVC project will further cement the company’s as the leading producer of this specialized product.”

Eventually, this will reduce India’s dependence on the import of specialty paste PVC. India is currently heavily dependent on the import of specialty paste PVC from Taiwan, Korea, Thailand, China, and Malaysia. Also, European suppliers cumulatively export a large volume of specialty paste PVC to India. Chemplast Sanmar’s Mettur plant meets the demand for end-user industries including footwear, auto and furniture, upholstery, artificial leather products and mats.

Chemplast Sanmar reported a Rs 100 crore decline in its revenue from operations at Rs 888 crore for the October-December 2023 quarter, compared to Rs 988 crore reported in the sequential previous quarter. During the quarter, the company’s gross margin dropped by 200 basis points (bps) to 32 percent, compared to the previous quarter mainly driven by a contraction in spreads as highlighted earlier. The company reported an EBITDA loss of Rs 7 crore as against an EBITDA profit of Rs 46 crore during the previous quarter.

The finance cost of the company for the October-December 2023 quarter stood at Rs 47 crore as against Rs 39 crore posted in the July-September 2023 period mainly on account of higher interest on term loans post capitalization of phase one expansion project in the Custom Manufactured Chemicals division. The net loss for the quarter was Rs 89 crore as against the net profit of Rs 26 crore in the previous quarter.

For the nine months of FY2024, the company recorded revenue from operations of Rs 2,872 crore, a decline of 24 percent on a year-on-year basis. Other expenses dropped by around Rs 88 crore on a year-on-year basis primarily due to the reduction in power and fuel costs. Further, the company reported an EBITDA of Rs 5 crore and profit after tax loss of Rs 127 crore for the nine months of FY2024.

While this year, the results are subdued given the current market conditions, with the ramping up of the custom manufacturing business as per plan and the incremental volumes coming from the paste PVC project is expected to improve margins going forward. In line with the earlier guidance, the financial performance during the October-December 2023 quarter was adversely affected due to the continuing challenging environment. Specialty paste PVC prices were further corrected on account of dumping at lower prices from China and other countries, the slowdown in the other chemicals businesses (comprising of caustic soda, chloromethanes, hydrogen peroxide, and refrigerant gases) due to the oversupply situation in India, the increase in key feedstock prices and adverse impact of the lag effect in the correction of VCM prices.

During the October-December 2023 quarter, prices of both suspension and paste PVC were lower by 8 percent and 6 percent, respectively on a quarter-on-quarter basis. EDC prices witnessed a 12.5 percent increase during the third quarter compared to the second quarter, while VCM prices remained flat during the quarter.

Sales volumes of suspension and paste PVC were also slightly down compared to the previous quarter. The lower volume of suspension PVC was mainly due to reduced production on account of weather-impacted delays in feedstock arrival while paste PVC volume drop was more due to inventory movement.