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    Supreme Petrochem Q3 FY25 earnings call

    SPLPETROGood
    Chemicals·21 Jan 2025
    Management Summary

    Supreme Petrochem delivered strong volume growth of 21.1% in Q3 FY25, although margins faced compression due to an 11% decline in styrene monomer prices during the quarter. The company is aggressively pivoting toward value-added products, with its Mass ABS plant nearing completion and a major new expansion in Haryana underway. Management maintains a positive outlook with an 8% full-year volume growth target and expectations to return to double-digit EBITDA margins as new capacities come online.

    Highlights

    7

    • Revenue for Q3 FY25 stood at ₹1,405 crore with an EBITDA of ₹116.70 crore.

    • Net profit (PAT) for the quarter grew 5.5% YoY to ₹71 crore, with a PAT margin of 5.08%.

    • 9M FY25 PAT increased significantly by 32% YoY to ₹284 crore.

    • Sales volumes of manufactured products surged 21.1% YoY in Q3 and 13.7% for the 9M period.

    • Company remains debt-free with an investible surplus of ₹680 crore as of Dec 2024.

    • Mass ABS Project (Phase 1, 70k TPA) mechanical completion expected by March 2025, commissioning in Q1 FY26.

    • Announced a ₹800 crore CapEx for a new multi-product facility in Haryana.

    Concerns

    1

    • Raw material price volatility (Styrene Monomer)

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹1,405 Cr
    2. 02EBITDA₹116.7 Cr
    3. 03EBITDA Margin8.3%
    4. 04PAT₹71 Cr+5.5%YoY
    5. 05Volume Growth21.1%+21.1%YoY

    Segment breakdown

    SPC (Compounds)
    18,000 tonnes Volume₹262.5 Cr Revenue
    XPS (Insulation)
    39% Revenue Contribution
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Volume
    Total Sales Volume
    350,000 - 355,000 tonnes
    		High
    Volume
    SPC Business Volume
    Double current volume
    		Medium
    Capacity
    Mass ABS Phase 1 Commissioning
    70,000 TPA
    		High
    Capex
    Haryana Plant Investment
    ₹800 crore
    		Medium
    Revenue
    Sheeting Business Turnover
    ₹200 crore
    		Medium

    Risks & concerns

    6
    RiskSeverity

    Raw material price volatility (Styrene Monomer)

    Styrene prices fell 11% in the quarter, creating margin pressure due to the 4-6 week inventory lag. — Management acknowledged

    high

    High global freight rates

    Global freights remain up to 3x pre-pandemic levels, making exports less remunerative. — Management acknowledged

    medium

    Currency depreciation

    Management hedges 50-65% of forex risk and notes that landed costs/selling prices adjust to offset some impact. — Both downplayed

    low

    Areas of Evasion(3)

    • Specific export volume breakdown by application
    • Blended realizations and EBITDA for the SPC segment
    • International spot prices for XPS

    Q&A highlights

    3

    “The raw material always comes at prices which are almost 4 to 6 weeks prior to the arrival of the cargo. This always impacts the margins.”

    Explains why falling raw material prices (Styrene) actually hurt margins in the short term due to high-cost inventory arriving while spot selling prices drop.

    asked by Aditya Khetan

    2 min read5 chapters

    Detailed Narrative

    01

    Volume Growth vs. Margin Compression

    Supreme Petrochem achieved a robust 21.1% YoY volume growth in Q3 FY25, yet EBITDA margins were squeezed to approximately 8.3%. This was primarily driven by an 11% decline in Styrene Monomer prices from September to December. Because raw materials are contracted 4-6 weeks prior to arrival, the company was selling products at lower spot prices while processing higher-cost inventory, a typical lag effect in commodity chemicals.

    02

    Mass ABS: The Margin Accretive Pivot

    The Phase 1 Mass ABS project (70,000 TPA) is on track for mechanical completion by March 2025 and commissioning in Q1 FY26. Management highlighted that Mass ABS offers superior properties like UV stability and lower volatile organic compounds compared to emulsion-grade ABS. While initially priced competitively to gain market share, management expects this reactor-produced product to eventually command a premium and drive the company back to double-digit EBITDA margins.

    03

    Strategic Expansion in Haryana

    The company has initiated a ₹800 crore expansion in Haryana, targeting the North Indian market. The facility will have capacities of 100,000 tonnes for Polystyrene and 50,000 tonnes for EPS, alongside downstream units for XPS and 3D panels. Management expects an impressive asset turn of 2.5x to 3x from this site, with project implementation slated to begin in Q3 FY26.

    04

    Value-Added Product Traction

    Value-added grades now constitute 38-40% of the business. The SPC (compounds) business currently generates ₹250-275 crore in revenue from 18,000 tonnes of volume, with a target to double this in two years as ABS compounds come online. Additionally, the sheeting business is projected to contribute ₹200 crore in revenue, further diversifying the top line away from pure commodity cycles.

    05

    Operational Efficiency and Sustainability

    SPL has successfully reduced power costs by 25% through maximum permissible solar power installations. Management plans to extend solar capacity to meet the additional power requirements of the new ABS plant. On the logistics front, while global freights remain 3x higher than pre-pandemic levels, the company is focusing on domestic market depth to mitigate export margin volatility.

    This is an AI-generated summary of a publicly available earnings call transcript.