Essel Propack on track, new strategies yielding results

Essel Propack reported a consolidated net profit of 63 percent at Rs 22 crore against Rs 13.5 crore for a year ago period. "The numbers are in-line with the guidance that we gave and are seeing a good growth. The EBITDA margins are 18 percent. Profit after tax (PAT) has also improved, therefore, we are on the right track and a lot of changes that we have brought about are bringing in results," says Ashok Goel, MD & vice chairman of the company in an interview to CNBC-TV18.

Further Goel adds that the Essel Propack's Europe business incurred loss amidst new project ramp-up that will add upto 15 million euros per year into the top-line.

Below is an edited transcript of Ashok Goel's interview on CNBC-TV18

Q: According to your Q3 performance, the margins appear to have improved by 150 basis points (bps). Are you seeing further gap, is this because your raw material prices fell?

A: Yes, the numbers are in-line with the guidance that we gave and are seeing a good growth. If you look at the first nine months growth, it is in double digits. The EBITDA margins are what we promised to be 18 percent. There is an improvement on the PAT basis also there are improvements. Looking at the PAT for the first nine months, it has already surpassed the full profit of last year. Therefore, we are on the right track and a lot of changes that we have brought about are bringing in results.

Q: With regards to European business, despite the numbers or the revenue growing at Rs 53 crore versus Rs 43 crore on a year-on-year (YoY) basis, there has been a loss this time around, is there pricing pressure or maybe operational inefficiency that you are facing in the European markets?

A: Europe has been a loss-making unit, but this time it is a little more. This is because we have won a large multiyear contract with a multinational and are in the process of setting up that project in a ramp-up phase that will add upto 15 million euros per year into the top-line and that has caused a little abrasion in this quarter.

Q: How do you plan to reduce debt, your guidance was that you will reduce it from Rs 900 crore to Rs 500 crore, what does it stand at now and any update on the guidance?

A: We will have the debt servicing ratio of 1:1.5 and that is our stated objective.

Q: Where is it now?

A: We are right now at 1.2 and have some work to do on that side and are working on it.

Q: By when can you bring it to that level?

A: Our objective is to bring it to 1.5 by the middle of next financial year.

Q: While your operational margins have held up, your revenue growth too is not something to write home about, it is better in terms of the operational performance as oppose to the top-line performance for all, what sort of competition are you facing at this point in time and how could the revenue trajectory pan out for you?

A: Revenue over the last year has grown in double digits and will continue to have that growth. India has grown faster so has America. There is a little dip in East Asia Pacific, which is China region but we are working on that and therefore, we do not see any issue. However, our stated objective is to have 50 percent of our revenues coming from non-oral care sales. Two years ago, it was 25 percent, last year it was 35 percent, this year so far it is about 39.4 percent.

Q: Any more inorganic moves?

A: We are a little cautious on inorganic side at least for one year and that is the best way for us to go.