Release Date: August 14, 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 a 12% year-over-year increase in revenues, driven by a 12.4% volume increase.
- The company saw a significant uptrend in BOPET and BOPP prices, with BOPET prices increasing by 30% and BOPP prices by 18-19% since April.
- The offshore business reported improved margins, with a 13.4% margin in Q1 FY25 compared to 7.2% in Q1 FY23.
- The Aseptic Packaging division recorded its highest-ever production and sales, achieving a capacity utilization level of about 120%.
- Uflex Ltd (BOM:500148) is well-positioned to benefit from emerging opportunities in recycling PCR and MLP, with new laws mandating the use of recycled materials in packaging.
Negative Points
- The Flexible Packaging segment had a challenging quarter due to a lag in passing on raw material price increases to customers, impacting margins.
- The company reported a currency loss of INR180 crores, attributed to translation losses from Nigeria, Egypt, and Mexico.
- Despite the positive trends, the offshore business volumes remained largely flat on a sequential basis.
- The company's debt increased by INR98 crores due to higher working capital requirements, despite a reduction in long-term debt.
- Capacity utilization in some plants, such as the PET chips plant in Egypt and the Mexico CPP facility, is not yet at full capacity, indicating potential inefficiencies.
Q & A Highlights
Q: What is the timing for the full ramp-up of the Panipat PET chips facility, and what is the mix between captive and external sales?
A: We sold about 25,000 tonnes this quarter, with 70% being film grade and 30% bottle grade. The bottle grade was sold 100% in the market, while 55% of the film grade was consumed internally. At full capacity, the ratio will remain similar, with bottle grade sales increasing.
Q: What is the market share of UFlex Asepto in India?
A: We don't have the exact number ready. However, we aim to maintain a mix of 60% domestic and 40% exports at full capacity utilization.
Q: Can you quantify the annual savings from the long-term PPA in Noida?
A: In Noida, about 70% of power will be sourced from wind and solar, leading to approximately 30% savings on 18 crore units annually.
Q: What is the industry capacity utilization in India for BOPET and BOPP?
A: The current industry capacity utilization in India is about 65%. India has seen a 57% increase in BOPET exports and a 27% increase in BOPP exports year-over-year.
Q: How do you see the demand-supply equation for packaging films in India?
A: For BOPP, there are no significant capacity additions expected in the next 15 months. For BOPET, the balance is maintained with current numbers, and no new capacity is being added.
Q: Are international markets seeing the same price increases as the Indian market?
A: International markets, especially in America, have seen some price increases, but not as significant as in India. Indian PET exports have risen by about 67%, which helps keep international prices in check.
Q: Will the Plastic Waste Management Rule 2022 create a shift from BOPP to BOPET?
A: Yes, there could be a shift from BOPP to BOPET due to recyclability issues. This regulation will create more demand for BOPET, increasing both volume and value.
Q: When will UFlex start repaying its debt?
A: Debt repayment has already started, with a scheduled repayment of about INR1,000 crores annually.
Q: What is the capacity utilization of UFlex's plants, and when will they reach 100%?
A: The capacity utilization varies by plant. The Mexico and Egypt plants are not yet at full capacity, but we expect them to reach higher utilization levels soon.
Q: How will the new PET chips plant in Egypt impact UFlex's business?
A: The PET chips plant in Egypt will be a game-changer, feeding our plants in Egypt, Nigeria, Poland, and Dubai, with a 30% surplus for third-party markets or other locations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
