Chemplast Sanmar Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Chemplast Sanmar reported improved financial performance in Q3 FY25 with revenue up 19% YoY and a positive EBITDA, driven by strong growth in Specialty Chemicals. However, the company continues to face challenges from product dumping, leading to margin pressures and inventory build-up in PVC segments, resulting in a net loss for the quarter. Management is optimistic about the impact of pending anti-dumping duties and expects full utilization of new capacities soon.

Highlights

  • Q3 FY25 Revenue of ₹1,058 crores, up 19% on a year-on-year basis.

  • Q3 FY25 EBITDA stood at ₹32 crores, a significant improvement compared to a loss of ₹7 crores in Q2 FY24.

  • For the first 9 months of FY25, EBITDA was ₹182 crores, a sharp increase from ₹5 crores in the previous year.

  • Specialty Chemicals segment saw Q3 sales volume grow 51% year-on-year to 24.9 kilotons, with Q3 revenue increasing almost 100% year-on-year to ₹377 crores.

  • Domestic demand for Suspension PVC registered 11% growth and Paste PVC registered 13% growth on a year-on-year basis in the 9-month period April to December 2024.

Concerns

  • The company still reported a net loss of ₹49 crores for Q3 FY25, though an improvement from ₹89 crores loss in Q3 FY24.

  • Dumping of Suspension PVC (from China) and Paste PVC (from European Union) resulted in pricing headwinds and margin pressures, leading to a 5% YoY decline in Q3 Suspension PVC revenue.

  • Finance costs for the 9-month period jumped 34% year-on-year to ₹174 crores, primarily due to interest costs on project financing.

Key financials

2 periods

Headline

  • Revenue
    ₹1,058 Cr
    YoY +19%
  • EBITDA
    ₹32 Cr
  • Net Loss
    ₹-49 Cr
    YoY +45%

9M

  • FY25 Revenue
    ₹3,195 Cr
    YoY +11%
  • FY25 EBITDA
    ₹182 Cr
    YoY +3,540%
  • FY25 Net Loss
    ₹-56 Cr
    YoY +55.8%
  • FY25 Finance Costs
    ₹174 Cr
    YoY +34%

What they filed

Q1 FY27: revenue up 2.3%, net profit down 175.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue993 1,058 1,151 1,100 1,033 +4%835 −21%1,256 +9%1,125 +2%
EBITDA26 32 37 17 43 +65%-57 −278%194 +424%-115 −776%
Net profit-31 -49 -54 -64 -51 −65%-119 −143%-45 +17%-176 −175%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Q3 Revenue
₹1,058 Cr Total
  • Suspension PVC ₹527 Cr 49.8%
  • Specialty Chemicals ₹377 Cr 35.6%
  • Value-added chemicals ₹154 Cr 14.6%

Capital allocation

high confidence
  • Debt Net ₹1,000 Cr
    And sir, lastly, what would be your net debt level as of the end of Q3? Around INR1,000 crores.

Guidance & targets

Revenue

  • CMC Business Revenue Revenue · FY27 · High confidence ₹1,100 crores
    So what we said is INR1,100 crores by FY '27, we are telling that we are on track for that.

    — N Muralidharan

Margin

  • CMC Business EBITDA Margin Margin · as operations stabilize · Medium confidence 23-25%
    Sanjesh, like we explained earlier also in the initial periods, it's a learning curve. So as we stabilize, we will hit the EBITDA margin. So in the initial period, the margin levels should be slightly lower. And as we move to stable level of operations, we will keep that level.

    — N Muralidharan

  • CDMO EBITDA Margin (Optimal Utilization) Margin · at optimal utilization · High confidence 20% plus
    Generally, the industry operates somewhere between 20% to 25% EBITDA margin levels.

    — N Muralidharan

Capacity

  • Cuddalore Paste PVC Plant Utilization Capacity · coming quarter · High confidence Full utilization levels
    The new Cuddalore Paste PVC plant is being ramped up, and we expect to achieve full utilization levels in the coming quarter.

    — Ramkumar Shankar

  • Paste PVC New Facility Utilization Capacity · by March or April · High confidence 100%
    The new one, which we commissioned in February '24, we've now ramped it up to around 80%, and 85%, and we expect to reach 100% by March or April.

    — Ramkumar Shankar

What to watch in Q4 FY25

Cuddalore Paste PVC Plant Utilization

coming quarter / March or April
Current Ramping up, new plant 80-85% utilized
Target Full utilization levels / 100%

Why it matters

Achieving full utilization of the new Paste PVC plant is crucial for realizing benefits from capacity expansion and improving overall operational efficiency.

The new Cuddalore Paste PVC plant is being ramped up, and we expect to achieve full utilization levels in the coming quarter.

Risks & concerns

  • Dumping of Suspension PVC and Paste PVC

    high

    Dumping from China (Suspension PVC) and EU (Paste PVC) is causing pricing headwinds, margin pressures, and inventory build-up.

    Both acknowledged

  • Delay in gazetting of anti-dumping duties

    medium

    Provisional anti-dumping duties are awaiting final notification from the Ministry of Finance, prolonging the impact of dumping.

    Both acknowledged

  • Inventory build-up in Suspension PVC

    medium

    Due to dumping, inventory has built up, impacting Q3 volumes and potentially Q4 margins, though expected to liquidate in Q4.

    Management acknowledged

  • Price pressure in Chloromethanes

    low

    Increased domestic supply has led to price pressure in Chloromethanes.

    Management acknowledged

Q&A highlights

6 direct
Drop in value-added chemical division volume (QoQ) Partial
Sanjesh, it is primarily due to two reasons. One is we have taken a regular maintenance for 10 days. That is one on the caustic soda side. And second, it was due to one timing of sales, a couple of rakes, which had to go in the last day got shifted to the next quarter.

Clarifies that a perceived volume decline in a key segment was due to temporary factors (maintenance, timing) rather than underlying demand weakness.

Asked by Sanjesh Jain

Sharp jump in employee cost in CCVL Direct
It's primarily because of 2-3 reasons. One is it's the annual increments. And like we normally give senior management increments once in 2 years. So, we'll have a cumulative impact this year. That is one. And second, the senior hires we had, and we also strengthened the technical team.

Explains the increase in operating costs as an investment in human capital (increments, senior hires, technical team) rather than inefficiency.

Asked by Sanjesh Jain

PVC business pressure and lower spreads in March quarter Partial
See, as I mentioned in the speech, on a marginal basis, the margins are still holding strong because the feedstock VCM is following the PVC prices. It is only on account of the inventory that is there, which is at a higher cost. And normally in a falling price market, the inventory impact will always be there.

Highlights the ongoing margin pressure in PVC due to high-cost inventory in a falling price market, despite stable marginal raw material margins.

Asked by Sanjesh Jain

Dependence on anti-dumping duties for viability Direct
Anti-dumping is actually a response to something that is an unfair trade practice. So it is not something that is a standard practice. We do not depend on anti-dumping but then we also do not expect dumping.

Addresses a strategic concern about the company's reliance on trade protection, framing it as a necessary measure against unfair competition.

Asked by Jayesh Parekh

SPVC volumes declining despite strong demand Direct
Yes. That is a good question. And I also mentioned in response to an earlier thing that there have been some inventory build-up that has happened. And that is largely because of the dumping that we have seen, especially from China in Suspension PVC.

Explains the paradox of declining company volumes in a segment with strong domestic demand, attributing it to inventory build-up caused by dumping.

Asked by Dhruv Muchhal

Delay in final gazetting of anti-dumping duty for Paste PVC Direct
It was only a timing issue. The provisionals are valid for 6 months and the final has to come into the picture. The final actually came in a week later. But ultimately, it will have to be notified and gazette by the Ministry of Finance.

Provides clarity on the status and reasons for the delay in implementing crucial anti-dumping duties, which are vital for PVC segment profitability.

Asked by Ranjit

Current utilization and breakeven for Paste PVC Direct
In the new facility, we are already at around 80% to 85%. The old facility we are running at 100%... we expect to reach 100% by March or April. Breakeven is not so much on the volumes. It's more on the price.

Offers insight into operational efficiency and highlights that profitability in Paste PVC is more sensitive to pricing (and thus anti-dumping duties) than volume.

Asked by Rohit Nagraj

CMC business growth and FY27 target of INR 1,100 crores Direct
So what we said is INR1,100 crores by FY '27, we are telling that we are on track for that. And even this year, you will see a significant healthy growth you will see this.

Reaffirms the company's commitment and progress towards a significant long-term revenue target for its high-growth Custom Manufacturing Chemicals (CMC) division.

Asked by Sanjesh Jain

2 min read 5 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Chemplast Sanmar reported a Q3 FY25 revenue of ₹1,058 crores, marking a 19% year-on-year growth. The company's EBITDA for the quarter stood at ₹32 crores, a significant improvement from a loss of ₹7 crores in Q2 FY24. Despite this, the company recorded a net loss of ₹49 crores for Q3, though this was an improvement from the ₹89 crores loss in Q3 FY24. For the first nine months of FY25, revenue reached ₹3,195 crores (up 11% YoY) and EBITDA was ₹182 crores (up from ₹5 crores YoY), with a net loss of ₹56 crores (vs ₹127 crores loss YoY).

Segmental Performance Highlights

The Specialty Chemicals segment demonstrated strong growth, with Q3 sales volume increasing by 51% YoY to 24.9 kilotons and revenue nearly doubling to ₹377 crores. For the nine-month period, sales volume grew 35% to 71.6 kilotons, and revenue increased 62% to ₹1,031 crores. Value-added chemicals saw a 10% YoY improvement in Q3 revenue to ₹154 crores, and an 18% YoY increase for 9M FY25 to ₹466 crores. In contrast, Suspension PVC revenue declined by 5% in Q3 to ₹527 crores and 8% for 9M FY25 to ₹1,699 crores, primarily due to inventory build-up.

Impact of Dumping and Anti-Dumping Duties

The company continues to face significant challenges from dumping of Suspension PVC, particularly from China, and Paste PVC from the European Union, leading to pricing headwinds and margin pressures. Domestic demand for Suspension PVC grew 11% and Paste PVC grew 13% in 9M FY25, but the company's volumes were impacted by cheaper imports. Provisional anti-dumping duties on Paste Resin from China, Thailand, and Taiwan provided some relief, but this was offset by increased imports from Europe. A new anti-dumping investigation has been initiated against EU and Japan for Paste PVC, with management hopeful for early gazetting of duties.

Operational Updates and Capacity Utilization

The new Cuddalore Paste PVC plant is currently ramping up and is expected to achieve full utilization in the coming quarter (Q4 FY25), aiming for 100% by March or April. The existing Paste PVC facility is already running at 100% utilization. In the Custom Manufactured Chemicals (CMC) division, Multipurpose Block 3 Phase 1 is ramping up well, and Phase 2 was commissioned in December 2024, with expectations of healthy revenue growth for FY25. The company is on track for its FY27 revenue target of ₹1,100 crores for the CMC business, with an EBITDA margin target of 23-25% as operations stabilize.

Cost Structure and Debt Profile

Employee costs increased due to annual increments, senior hires, and strengthening of the technical team, particularly impacting the Paste PVC and CMC projects. Finance costs for 9M FY25 jumped 34% YoY to ₹174 crores due to interest on project financing. The company's net debt stood at approximately ₹1,000 crores at the end of Q3 FY25. Management indicated that the breakeven point for Paste PVC is more dependent on price realization (influenced by anti-dumping duties) than volume, rather than solely on utilization levels.

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