UFLEX Y 2012 Earnings Call 15 May’12
Operator
Ladies and gentlemen, good day and welcome to theQ4 FY12 Results Conference Call of UFLEX Limited hosted by Almondz Global
Securities Limited. As a reminder all participant lines will be in the listen‐only mode. And there will be an opportunity for you to
ask questions at the end of today's presentation. Please note that this conference is being recorded. I would like to hand the
conference over to Mr. Sundar Subramani of Almondz Global Securities Limited. Thank you and over to you sir.
Corporate Participant
Thank you, ‐‐. Good morning everyone on behalf of Almondz Global Securities Limited it's indeed a great pleasure to welcome you
all to the Q4 FY12 earnings conference call of UFLEX Limited we welcome Mr. R.K. Jain Group President and other members of the
management team to the call. I would like to hand over the proceedings to Mr. R.
K. Jain to take us through this quarter's performance and provide insights into the business.
Sir, over to you.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Thank you, Sundar. Thank you very much. And good morning to all of you. And I welcome to you all for this particular conference.
And I would like to present before you the Q4 financial year 12 results of the company and the total full year results for the
company what has been achieved by the company during this year.
Before I really present the details of the performance of the company for this quarter and for the whole year. I would like to just
touch upon the operating environment which was prevailing during the fourth quarter as well the previous year.
The rest of the period in the previous year. In fact that we have been taking over quarter and quarter that there has been a pressure
on margin downward pressure margin on the PET Film, because all of you know that of the PET Film business during a financial year
'11 was particularly high and which was a never heard of never experienced off and the consequent effect of that has been there in
the last year that is the financial year '12.
And a result of that the downward pressure continued during the whole year.
And particularly this third and fourth quarter was the worst effected.
But on the other hand, I would like to say that there have been a silver lining. Since the company is dealing in the other products. So
the capacity expansion, the better utilization of capacity. And as a result of that growth in sales volumes has really contained the
damage which could have been much much higher so in the light of this environment I would like to present before you the
performance achieved there is quieter end for the full year.
The company has done total sales volume of 61,186 metric ton for the fourth quarter, divided into packaging of 11,127 tons and
the film of 50,000 tons.
This is basically a growth of around 20% over that corresponding period of the previous year.
The total business of volumes in international domestic market has been 33,000 approximately and 28,000 for domestic. In the ratio
of 55 and 45. Where as the in terms of sales value the net revenue has been Rs. 1,152 crore up by 23% over the previous period.
EBITDA has been Rs. 1,884 crore and the net profit of 51 at the gross cash equivalent of 105.
So, the over all performance if you look at the net profit of 51 is more or less in line with what we achieved during the third quarter
too.
In this whole year for financial year 12 the total business, in terms of volumes for packaging was 48,000 approximately and film was
189,000 aggregating to total volume of 237,500 approximately. Up up 22% over the previous period.
As I mentioned that there has been a silver lining that, there has been growth in sales volume. So obviously the sales volume has
grown by 22% for the whole year. Internationally we have done close to 124,000 and domestic volume have been 114,000
approximately.
So, this is all showing a improvement over the previous year.
The net revenue for the whole year has been 4,428 crore, up by 30%. The volume have been up 20% for 22%. Where as the revenue
in terms of sales has been 30% up to 4,428 EBITDA for the whole year is 688 crore net profit is 256 and cash accruals of 433crore.
The total business of packaging and film in the ratio of the sales revenues is for the quarter was around 50/50 where as for the
whole year was 47/53.
So as we've been mentioning the packaging is catching up more and more shares is been contributed by packaging business
plus allied businesses of packaging. So the share of packaging is going in the ‐‐ of the business.
The international domestic in terms of sales revenue is 40/60 for this quarter whereas for the whole year it's 44/56. So
international is growing as you know that more and more capacity for the film are added in to the international market so they are
contributing to the overall revenue of the group. So, as a result the international revenues are growing the share of international
revenue is gradually growing against the domestic market. While domestic is also growing but international is growing faster.
So, this is what has been the overall performance of the quarter. And on the other end this company had planned for certain
expansions during the last year. Al those have been well completed in time. The total projects which were in Egypt was CPP
plant, ‐‐ and special plant. They all got commissioned as per the schedule.
Even in India the project for expansion of packaging business plus the ‐‐ business were true.
Also got completed during the last year. As per the current year expansion which are to complete company had planned ‐‐ for the
new project at Poland and Kentucky. They all are getting completed with full speed.
Poland is expected to be completed by the end of June 12 and Kentucky is expected to complete by December 12. And I am sure
that with the completion of these projects these revenue they will also contribute to the increase in the revenues and the volume
of the current year workings.
Total capacity after these expansions will be taken in to account as of now and by the financial year '13 is expected to be for the
packaging businesses 67,000 tonnes for the PET film will be close to 256,000 tonnes and BOPP should be around 81,000 tonnes
both in India as well in international market.
This PET film of 256,0000 tonne make a significant position in the international market may be third or fourth largest one of the
largest players in the international market.
Having said ‐‐ which was not very encouraging as I mentioned because of mixed scenario prevailing during the whole of the last
year. But on the other hand makes that the better outlook for the current year.
We expect that these ‐‐ sales working volume and the value are expected to grow around 30% and equally the net profit also is
expected to grow somewhere on 55% to 60% in this year.
And as a result of this earning per share is also expected to be around Rs. 55 to Rs. 60 a share. As against, I think for the current
year what we achieved is around Rs. 35 per share. So I can only say that as we are going forward with our plan for the completion
of various expansion program ‐‐ expect that operating environment both in the Indian and international market is expected to
improve.
As a result of it this year looks to be far better than what we could do in the previous year. So, just explanation I would like to
comment I my communication and speech. Thank you very much.
Questions And Answers
Operator
Thank you very much sir. We will know begin with our Question and Answer session. [Operator Instructions]. Our first question is
from the line of Gaurav Singh of Bonanza Portfolio Limited. Please go ahead.
Analyst
Good morning sir.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Good morning
Analyst
Sir, if you could give me the scenario for BOPET film as in the realization that we've clocked in the current quarter
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
The realization ‐‐ has been announced under 103 to ‐‐. And we expect that this current quarter is expected to be better than this
what we achieved in the March quarter and from October onwards I think we should be quite close to the normal level this is what
has been the feeling as we are operating the market that is domestic market and internationally also we have seen that the current
quarter has shown quite good improvement and we are adding towards the normal fee.
So obviously the price is one has to see the pricing with reference to the input cost so what when I say that normal it means the
gross margin or the EBITDA margin per kg. So we are heading to the normal ‐‐ towards the EBITDA per kg and both in the
international market as well as the domestic market. So hopefully I think this should we should be able to catch up to the normal
level by September end or may be early October.
Analyst
And, sir how is the BOPP film scenario?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
BOPP is doing very well. I mean even last year I think that site was majorly coming out of other product group as well as the BOPP
better than the normal. So that could also contain the large ‐‐ PET film downward margin. And this year also so far it has been going
fine more or less at the same level. And we expect to have the same pricing and the margin level of the BOPP to continue in the
current year too.
Analyst
So, currently what would be the realization for BOPP, is that
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
BOPP is something around Rs. 135 kg. So that is the normal level what was there during the last year with Rs. 1 or Rs. 2 here and
there.
Analyst
Okay. And sir, if you could give me the EBITDA per kg between packaging and plastic films.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Packaging in fact if I tell you the packaging, there are so many other incidental product like machine, hologram and what you call
the rotogravure cylinders all put together because I don't know separate ‐‐ in packaging, laminate and these items term.
So, the EBITDA has been around close to more than Rs. 100 for this quarter and plastic film has been around Rs. 12 a kg.
Analyst
Okay
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
So, I think packaging what I mean so it should not be misunderstood because this is the aggregate of the total activity linked to the
packaging main laminate product plus the other ancillary activity which we do the margin of those also the profit of those also are
added into packaging business ‐‐ margin numbers.
Analyst
Okay, sir. Sir one more thing in the effective tax rate I think this quarter we have clocked a effective tax rate of 31.4%
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Which is 1.1% approximately yeah, you are right.
Analyst
Could you explain how why this thing has gone up?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
You know what happened that when we do some kind of a calculation we have to do the calculation on
quarter‐on‐quarter.
Analyst
Okay.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
There are some changes, which takes place. So, obviously if you look like total average tax rate for the whole year is around 18.5%.
Analyst
Yes sir
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Right. So, this is basically based on certain profits earned on each quarter so I can't explain beyond this may be some kind of
deduction and other benefits which are there.
Those are accounted for there are some losses carried forward which are taken in to account when you calculate on each quarter
So, but yearly you have to look at the total impact if those benefits get exhausted by third quarter or second quarter as the case
may be then the incidence of tax goes up in the remaining quarter.
So, that could be the reason because our tax experts the tax experts in the company the work out this calculation and based on that
we understand that whatever benefit were available to the company got exhausted in the first three quarters and then this quarter
whatever profit has been earned is largely subject to the total taxbility. But the average is still coming to around 18%‐ 18.5%.
Analyst
So going forward we can assume it at 18%
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Going forward I would won't say that it is 18% because we have multiple locations so this is the net effect of the tax ‐some of the
territories are less taxed and some of the taxes are these are known tax Dubai and all that.
So, it should be somewhere around 20% may be around that much.
That would be going up as we are going forward because India is also becoming more taxable. So, obviously the interest on
tax is going to be higher.
It is around 20% you can say that this year we expect that tax ‐‐ will be
Analyst
And sir what is the status of the warrants how much of it has been converted and how much is still pending
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
The outstanding warrant which was there they all have been canceled only we had converted 35 lakh warrants in the beginning and
1 lakh warrants have been canceled the money what was paid as an advance has been forebidded because if you look at the overall
position of the pricing and everything it was decided by the promoters not to basically subscribe ‐‐ basically to ‐‐ rules of the SEBI ‐‐
the variable amount of loss has taken place with promoters on account of ‐‐ 75 crores.
Analyst
Okay sir. Thank you sir.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Thank you
Operator
Thank you very much. [Operator Instructions]. Our next question is from the line of ‐‐‐ of Prime Securities. Please go ahead.
Analyst
Good morning sir.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Good morning
Analyst
Sir, just a few bookkeeping questions.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Yes, please.
Analyst
Could you just break up your revenue of '11, 90 crores in to packaging and plastic films.
I understand packaging will have many other things, but that is how you have been giving historically, right?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Well, for this quarter 1,152, I got a figure 1,152 because you ‐‐ when they publish, but I am just sticking with the ‐‐
Analyst
Okay, okay.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Our ratio is around 50‐50.
Analyst
50‐50?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
For this quarter. For this whole year it is 47‐53.
Analyst
11‐53?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
47‐53 for the whole year. But for this fourth quarter is 50‐50.
Analyst
Okay, okay. Fair enough and sir if I am not wrong you said packaging margins at EBITDA level is around Rs. 100
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Everything as I said again I am reminding
Analyst
It includes many other things.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Includes many other things. So obviously if you ask ‐‐ only the packaging probably it will not be that high because there are so many
other activity which are only added in terms of profit. Then their quantities are not added to the packaging business. So obviously
the rate per kg it looks to be very high but the units are different.
Analyst
And sir could you give us some production guidance for FY13 and FY14
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
For '13 I told you that outlook to be much better than what we had experienced in last year.
And I had also mentioned that we are expecting a sales growth of around 30% both in terms of volume and value.
Net profit is expected to be higher compared to the last year by 55% to 60%.
Analyst
Okay. Sir, what I wanted was hard production number. So just to give you roughly in plastic films. Can we expect around 2,40,000
tonnes ‐‐ put together.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Plastic should be last year it was 188,000 as I mentioned
Analyst
Yeah
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
This year we expect to do something around more than 275,000 to 280,000
Analyst
Okay 275,000 to 2,80,000
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
And packaging from 48,000 we do expected to do around 60,000
Analyst
Okay
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
That's the reason I said that the growth is going to be 35% more than the revenue growth. This is basically is the silver lining for us
because that's a winning point that despite the fact that the operating environment is not been good for the PET film and others
sometimes it keep changing but the sales growth continues to take place so that basically saves us from the sharp drop in the
bottom line.
Analyst
And sir now the since the warrants have lapsed sir how do you plan to finance your further ventures
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
No this is being done basically all these have already been decided to be funded partly by ‐‐ and partly ‐‐ any other new project will
come that has to be made out of largely from the accrual because they won't be very heavy expansions been undertaken by the
company.
As we go forward. So they will be in line otherwise. Then we will see how the fund ‐‐ some interesting or very important things
come in which are going to be strategically good for the long term point view may be some kind of acquisition so at that time
point we will decide who to basically plan the raising of funds for the equity or may some other method.
Analyst
No, no. I was not saying for the venture that you have not yet declared in public domain. I was more on the venture that you have
already declared in the public domain. So.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
We have already finalized because we are funding out of accrual as well as out of the ‐‐
Analyst
Okay. So..
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
‐‐ project they have already been in the crystallize and formalized last year itself.
Analyst
No no. Sir then what could we expect increase in debt for FY13 and FY14 around 500 crore each year?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Let me tell you ‐‐ not much because there are some repayments also to be made. So, on the whole the total debt let me just tell
you is going to be up to by Rs. 400 crore. After that there has to be a drop.
Analyst
In FY13?
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
FY13 would be increased by 400 crore both the Kentucky and Poland the debt has not been fully reflected in the last year. Because
they are still under implementation in the current year. We expect to complete by June and December so major portion of debt is
going to come only in this year.
But, you know let me tell you the debt equity. I think more important is the debt equity that to me looks in absolute terms and
going up but on the whole my debt equity continues to be lower ‐‐ this is what we have been saying.
Analyst
Okay, okay.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
‐‐ is going to be much higher than the total debt of 23, 24 whatever it comes to.
Analyst
And sir, this time around you have not published your consolidated balance sheet, so could you just give us your balance sheet
on this thing or you are gone mail it separately
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
We don't do that because this is only a provisional manager we want to do the audited one but we can just send you or you may
ask something so I can tell you right here.
Analyst
Okay sir actually it would be helpful if you could just send us your provisional balance sheet, consolidated balance sheet.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
We will send you that we'll send you the brief of the balance sheet we won't give the ‐‐ as it is required.
Analyst
Yeah we understand that it may not be as per the latest schedule ‐‐ but even broadly as per the old schedule also is fine with us.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
We'll give you the break up of that constituents of the balance sheet. So, that you understand what is what in terms of assets and
terms of liabilities.
Analyst
Okay.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Okay. So that we will tell to you may be today itself.
Analyst
Today itself.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
This is your ‐‐ security, we will send it to you
Analyst
Yeah, I'll just to speak to Mr. Khan after the call.
Corporate Participant
That's great. That's wonderful. You can just leave me ‐‐ I think you must having it.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
‐‐ already I noted, I will forward it to you.
Analyst
Okay sir.
Corporate Participant
Okay. Thank you.
Analyst
That's all from my side as of now. If I have any other query I'll get back to you
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Do let us know. Thank you.
Analyst
Thank you sir. And all the best.
Operator
Thank you very much. Our next question is from the line of Mr. Mangesh of Almondz Global. Please go ahead.
Analyst
Sir Good morning
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Good morning
Analyst
I just wanted to know the contribution from our newly launched capacities in FY13
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
FY13 or FY12,
Analyst
FY13 going ahead sir.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
The contribution means.
Analyst
How they are going to contribute in our total production.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
As I mentioned in my previous reply to question raised by my friend. What we are saying that the film business is going to grow from
188,000 tonnes to 275 plus. So now you can see that how this volume is going to grow. And this all is partly by the new capacity
which are selling in the during the financial year 13 for Poland and Kentucky plus the capacity which was setup during financial year
12.
So it's aggregate effect of the all which is going to grow the volume of plastic film from 188,000 to 235,000, 280,000. Equally for
packaging for 48,000 to 60,000 12,000 tonnes increase is also going to be additionally contributed by our new facility set up
Jammu2 and Jammu3 and Jammu1.
So we can explain to you the contribution of these additional investment only in terms of growth coming into the volume. So this is
growth we are expecting from 236,000 tonne what we achieved during the last year to go upto something around 345,000 tonnes
during the the current year. Which is almost in 100,000 tonnes of additional volume which we are going to have which is going to
be contributed additional by the new capacity as well as growth of the existing capacity.
Analyst
In terms of sir competitive environment how the other capacities are coming in the or competitive market
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
You mean to say ‐‐ film
Analyst
Yeah
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Packaging of course is not much as we know it's the different business but PET Film I think after the experience of the previous year
where the pressure has been there and margins have been at hit the rock bottom.
Last new comer who had decided we had planned to set up they had all suspended their plans and we don't expected any major
investments or major project to coming in both in India as well as in the international market during the year '13 and '14 very few
other players are going to be talking like we are talking about ‐‐ expansion in the America and very selectively the international
players also are looking at setting up new capacities. So, we don't expect that there will be flood of capacity coming in. That's the the
reason we expect that this will rectify the gaps between the demand and supply in the global market.
Hello?
Operator
Sir, please stay connected actually the line from Mr. Mangesh has been disconnected. In the meanwhile we just check if participants
have any question. [Operator Instructions]. Mr. Mangesh do you have any more question.
Analyst
No ma'am thanks.
Operator
Thank you very much.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Thank you.
Operator
[Operator instructions]. As there are no questions from the participants. I would now like to hand the conference over to Mr.
Sundar Subramanian for closing comments.
Corporate Participant
On behalf of Almondz Global Securities I thank Mr R.K Jain and its management team for giving us their valuable time, providing us
with detail insights about the company. I would also like to thank all the participants for joining the call. Thank you very much.
R. K. Jain, Group President, Corporate Finance and Chief Financial Officer
Thank you Sunder. Thank you very much to all of you who had been there on the call. And call coordinator too. Thank you.
Operator
Thank you very much sir. On behalf of Almondz Global Securities Limited that concludes this conference call. Thank you for joining
us and you may now disconnect your lines.
Corporate Participant
Thank you.
Operator
Thanks so much sir.