Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Uflex Ltd (BOM:500148, Financial) reported an 8% volume growth across all business segments.
- Revenue for Q4 FY24 grew by 4.5% quarter-on-quarter and 3% year-on-year, reaching approximately INR3,497 crore.
- The company saw a 6.9% improvement in profitability quarter-on-quarter and 6.3% year-on-year.
- Uflex Ltd (BOM:500148) successfully launched a new high-capacity machine for aseptic packaging, increasing capacity from 10,000 to 25,000 packs per hour.
- The company achieved significant volume increases in North America and Mexico, with Poland and Hungary also showing strong production growth.
Negative Points
- The domestic packaging film market remains subdued due to overcapacity, leading to price erosion and margin pressure.
- Currency devaluation in Nigeria and Egypt resulted in a significant financial impact, with a devaluation impact of INR177 crore in Q4 FY24.
- The company faces ongoing challenges with currency fluctuations, particularly in Nigeria, which saw a 183% devaluation over FY24.
- Uflex Ltd (BOM:500148) has a net debt of INR5,569 crore as of March 31, 2024, with expectations to increase to around INR6,000 crore.
- The company is experiencing capacity constraints in its aseptic packaging division, impacting its ability to meet demand fully.
Q & A Highlights
Q: What is the peak sales volume expected on full ramp-up of overseas plants?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: We can expect better volumes from our plants in Nigeria, Mexico, India, Poland, Hungary, and Egypt. The total additional capacity is around 74,000 tonnes, with further incremental volumes from new CPP lines in Russia and Mexico.
Q: What is the expected timeline for ramping up Nigeria's capacity utilization?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: We are targeting to increase Nigeria's capacity utilization from 67% to about 85% within a quarter's time, considering some constraints.
Q: Can you quantify the power cost savings due to the renewable energy tie-up in Dharwad?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: We expect about 40% savings in power costs, translating to approximately INR35-40 crore annually. The power supply is expected to start in June.
Q: What is the CapEx guidance and estimated net debt for the current fiscal?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: We will provide detailed CapEx guidance in the next quarter. The net debt level is expected to be around INR6,000 crore.
Q: What is the expected timeline for commissioning and ramping up the Asepto packaging to 12 billion packs?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: The ramp-up to 12 billion packs will happen by September or October, with full stabilization expected by January, aligning with the new season.
Q: How much of the reported ForEx loss in FY24 was cash loss versus notional loss?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: Most of the ForEx loss is notional, resulting from the translation of local currency financials to dollars and then to INR. Only an insignificant portion is cash loss.
Q: What are the expected additional revenues from existing and new facilities in FY25?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: We expect additional revenues of INR2,000-2,500 crore at the consolidated level from existing and new facilities.
Q: What is the tenure and nature of the renewed power contracts in Poland and Hungary?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: The contracts are a mix of spot basis and hedged for a quarter or two. The power cost has reduced by roughly 40%, and this stability is expected to continue through FY25.
Q: Do you see any opportunities opening up with the Extended Producer Responsibility (EPR) regulations?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: While EPR is mandatory, its effectiveness and implementation remain to be seen. We are focusing more on biodegradable films as a significant opportunity rather than recycling, which is more localized.
Q: How does the biodegradable packaging opportunity compare to recycling?
A: Rajesh Bhatia, Group President - Finance and Accounts, Chief Financial Officer: Biodegradable packaging offers a centralized opportunity with added enzymes during manufacturing, making it easier to manage compared to localized recycling efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
