Release Date: November 18, 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 13.7% year-on-year increase in consolidated revenue, driven by a 23.4% growth in the packaging sales business.
- The company achieved a high capacity utilization rate of 93% in its packaging business during a typically lean season.
- Sales volume for Q2 increased by 10.9% year-on-year, with packaging sales volume growing by 14.6%.
- The company is optimistic about its recycling business, anticipating momentum with upcoming EPR guidelines in Europe and India.
- Uflex Ltd (BOM:500148) plans to expand its aseptic packaging capacity in Egypt, targeting both local and European markets, which is expected to boost margins and sales volumes.
Negative Points
- Currency devaluation in markets like Mexico and Nigeria led to significant translation losses, impacting financial results.
- The company faces challenges in its flexible packaging margins due to a lag effect from rising raw material prices.
- Higher energy costs in Hungary affected the overseas business EBITDA, which decreased compared to the previous quarter.
- The company's net debt increased slightly, with ongoing projects requiring further investment.
- Uflex Ltd (BOM:500148) is experiencing competitive pressure in overseas markets due to cheaper imports from India, affecting pricing and margins.
Q & A Highlights
Q: Could you provide an update on the recycling business, especially regarding the utilization levels of the recycling plants set up overseas and in India?
A: We remain optimistic about the recycling business. However, the momentum will pick up significantly once the EPR guidelines in Europe and India are enforced, which are expected to come into effect from January and April/June, respectively. The facilities are operational, but the real growth will be driven by regulatory compliance. We've shared some numbers in our presentation regarding production achievements in this quarter.
Q: What are the current dynamics of the BOPP film industry, and how do you see the margins evolving in the second half of the year?
A: We are confident that H2 margins in the BOPP industry will remain at reasonable levels. The current margins could improve slightly. The domestic market might see some margin cuts due to increased product availability, but overall, we expect margins to be better than in Q1.
Q: How do you plan to address the high finance costs and exchange losses, especially given the economic situations in Nigeria and Mexico?
A: We acknowledge the challenges posed by currency devaluation in these regions. We are exploring options like listing our offshore subsidiary to unlock value and potentially reduce debt. However, these translation losses are notional and do not affect our operational cash flows. We are committed to managing these financial aspects prudently.
Q: Can you elaborate on the CapEx plans, particularly the maintenance CapEx and any significant projects underway?
A: Our CapEx for the current year includes ongoing projects like the Egypt facility and the CPP facility in Mexico. We expect to spend around $80 million in the next financial year. Maintenance CapEx is approximately 200 crores annually, which includes balancing machines and other necessary upgrades.
Q: What is the outlook for the US market, especially after recent political changes?
A: We are optimistic about the US market. The new government's focus on boosting domestic manufacturing could benefit us. We are already performing well in the Americas and are considering expanding our local production to meet the growing demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
