Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Specialty polymer business saw sharp growth both year-on-year and quarter-on-quarter, with Q1 revenues of INR45 crores and an EBIT margin of 43%.
- Film business has started witnessing positivity in terms of pricing and margins after undergoing challenges over the last 24 months.
- Ester Filmtech generated revenues of INR81 crores with volumes of 6,501 metric tonnes during the quarter.
- The joint venture with Loop Industries is progressing as per schedule, with commercial production expected to commence in the first half of 2027.
- The company expects robust growth in domestic and global demand, leading to improvement in margins and profitability for both Ester Industries and Ester Filmtech.
Negative Points
- Lower volume growth in the film business during the quarter due to the shutdown of film production lines for maintenance.
- Despite improvements, the demand-supply gap in the film business still persists.
- The business incurred a loss of INR2 crores during the quarter, although this was an improvement from the INR5 crores loss in Q1 FY24.
- Gross term debt and net term debt in the books of Ester Industries Limited stood at INR180 crores and INR92 crores, respectively, indicating significant leverage.
- The company faces challenges from significant oversupply in the market caused by the bunching of new capacities over the past two years.
Q & A Highlights
Q: The growth in the film business appears subdued given the demand and improving margin profile for the industry. How do you see the next two to three quarters playing out?
A: The improvement has just started a couple of months ago. You can expect to see substantially better numbers in the coming quarters. - Arvind Singhania, CEO
Q: What is the progress with regard to the JV with Loop?
A: The JV with Loop is progressing very well. We have made a time schedule and are hopeful of breaking ground in the first quarter of calendar year '25 and starting up in the first half of '27. - Arvind Singhania, CEO
Q: Can you throw some figures in terms of the demand-supply gap in the film business?
A: Currently, the installed capacity is about 110,000 tonnes per month, with an effective operational capacity of 100,000 tonnes. Domestic demand is estimated at 65,000 tonnes per month, and exports take away about 20,000 tonnes, leaving a demand-supply gap of about 15,000 tonnes. - Arvind Singhania, CEO
Q: What are the spreads in the film business currently, and how have they changed over the past year?
A: The spreads over PTA MEG are currently about INR37 to INR38 per kilo. In Q1, it was about INR17 to INR18, and in June '23, it was about INR23. - Arvind Singhania, CEO and Pradeep Rustagi, Executive Director - Corporate Affairs
Q: What is the expected revenue from the specialty polymer business for this fiscal year?
A: We expect to achieve around INR200 crores in revenue this fiscal year and continue to grow by 20%-25% per annum. - Arvind Singhania, CEO
Q: How do you see the impact of the Plastic Waste Management Rules coming into effect in April 2025?
A: These rules will mandate 10% recycled content in flexible packaging laminate, which is expected to increase demand and better margins for polyester film. - Arvind Singhania, CEO
Q: What is the current status of the BOPET capacity coming on stream in the next two to three years?
A: One line is starting up this year, and another is expected in '25. After that, the next capacity addition will be in '27. - Arvind Singhania, CEO
Q: How do you see the demand for BOPET transitioning due to the Plastic Waste Management Rules?
A: The demand for BOPET is expected to improve as it is the only substrate that can offer recycled content, leading to a shift from other substrates. - Arvind Singhania, CEO
Q: What is the cost advantage of having your own chip plant?
A: Running the continuous polymer plant at higher capacity results in marginal incremental power and fuel costs, making it beneficial to produce chips for internal use. - Pradeep Rustagi, Executive Director - Corporate Affairs
Q: How do you see the demand growth for polyester films in the FMCG sector?
A: The demand is largely driven by FMCG, particularly snack foods, which is a high-growth segment in India. - Arvind Singhania, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
