Chemplast Sanmar reports challenging Q2 FY25 earnings amid PVC price turbulence

Chemplast Sanmar Limited, a major player in the Indian specialty chemicals sector, disclosed its Q2 FY25 earnings, indicating significant challenges due to intense market pressures on PVC prices. The company, known for its leadership in Speciality Paste PVC and its substantial role in Suspension PVC production, reported revenue of Rs. 993 crore for the quarter ending September 30, 2024. This marks a modest 1% increase from Rs. 988 crore in Q2 FY24 but represents a stark 13% decline from Rs. 1,145 crore in Q1 FY25.

The primary cause of this financial strain was attributed to excessive dumping, particularly affecting the PVC market. Despite domestic demand being weakened by seasonal monsoon impacts, the influx of low-cost PVC from China compounded challenges. This competition was propelled by reduced local demand in China, influencing a supply-driven price reduction that impacted Chemplast’s margins. In response, provisional anti-dumping duties were announced on imports from several countries, including China, the U.S., and South Korea, a development that Chemplast’s management hopes will soon mitigate the competitive disadvantage.

Managing Director Ramkumar Shankar commented that while the company navigated a volatile market, achieving Rs. 2,138 crore in revenue for H1 FY25 highlighted resilience amidst adversity. The Custom Manufactured Chemicals Division (CMCD) maintained stability during the quarter, with the firm securing a notable letter of intent (LoI) with an agrochemical leader for supplying an advanced intermediate over the next five years. This milestone marks Chemplast’s sixth such agreement within two years, underscoring strategic growth in custom manufacturing.

The production of paste PVC at the new Cuddalore facility is set to reach full capacity by Q3 FY25, an essential step for bolstering future output. Additionally, phase two of the company’s multi-purpose production block (MPB) is slated for commissioning in the same timeframe. Chemplast has also commenced groundwork for phase three and other infrastructure projects, laying the foundation for long-term expansion.

Despite these ambitious projects, EBITDA for Q2 FY25 fell sharply by 44% year-over-year, declining from Rs. 46 crore in Q2 FY24 to Rs. 26 crore. This reflected an EBITDA margin contraction to just 3%, emphasizing the challenging financial landscape. Profit after tax (PAT) also shifted negatively, recording a loss of Rs. 31 crore compared to a profit of Rs. 26 crore in the same quarter last year.

While the value-added chemicals segment witnessed a 6% sequential revenue increase, stabilizing prices for Caustic Soda and Hydrogen Peroxide were key contributors to this growth. Ramkumar Shankar stressed that the company remains committed to sustainability and operational excellence. Chemplast’s proactive stance includes advocating for effective implementation of anti-dumping measures to curb market disruptions.

Looking forward, Chemplast is optimistic about long-term growth, supported by continuous capacity expansions and strategic capital investments. Shankar emphasized enhancing workforce competencies and leveraging strong partnerships to ensure sustained development.