Expect 14-14.5% margin improvement by FY16-end: Uflex

Packaging firm Uflex reported a 37.86 percent increase in its net profit to Rs 78.68 crore for the third quarter ended on December 31. The company’s sales, however, declined 1.43 percent to Rs 1,461.32 crore during the quarter. Speaking to CNBC-TV18, R K Jain, Group President of Uflex said that the packaging business grew at 10 percent in terms on volume and is expected to grow at such strong levels in coming quarters as well. Fall in raw material prices weighed on topline growth, he added. The company’s packaging films business continues to reel under pressure and will remain so in next one or two quarters, he said. Jain expects margins to improve to 14-14.5 percent by end of FY16 and a double digit topline growth. Below is the verbatim transcript of RK Jain’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.Nigel: on the top-line we are seeing a bit of a dips so could you break that up for us? Realisations we are aware that in fact selling prices were lower in the past quarter what were volumes?A: Volumes, if you look at the packaging business, it has grown in double digits. The total growth has been around 10 percent in terms of volume. In the value terms it has grown around 17 percent. Whereas the packaging film business of course has not grown in terms of volume as well as in terms of the top-line were the reasons that the prices have been falling. So, due to the fall in the price of the raw materials as a result of this the overall top-line has not shown a major growth as such. Reema: That has been the case even for the last nine months your revenues are down nearly 2 percent?A: It is all for the reason.Reema: So will that continue and if yes how many quarters more?A: This packaging film business has been reeling under stress over the last many years. This year also has continued and then I think this may continue for some more quarters in the sense may be another one or two quarters. We expect that the positions are likely to improve in the next year from the second quarter or may be third quarter onwards. As of now the position stands as it is but silver line is that the packaging business has been showing up and then showing a very good growth both in terms of volume as well as in terms of value. That is the reason you can see very well the top line which has been shown is improving quarter-on-quarter (QoQ) as well as compared to the corresponding period.Nigel: Let us talk about your margins then I mean at this quarter they came in at around 12.5 percent. This is consolidated margins. What is the trajectory going ahead? Can they improve further from here or you expect them to stabilise at around this 12.50 percent? I think on a sequential basis it is a tad bit lower.A: As I mentioned that it has an effect to the packaging film business but on the whole there has been an improvement in the packaging product business, packaging business what we do there has been an improvement by 2 percentage point on EBITDA level. However, the packaging film business which has been showing down in terms of the top-line as well as there has been some pressure on the margin too. So, obviously the overall gross margin put together both the businesses has not been shown very better. However, in time to come, yes, we expect this may go up to level of 14 percent on a whole by the year end. Then next year onwards because lot of other development has been done on the packaging business which is the high margin we expect to have a much higher EBITDA level margin in the coming years.Nigel: Let us talk about your margins then I mean at this quarter they came in at around 12.5 percent. This is consolidated margins. What is the trajectory going ahead? Can they improve further from here or you expect them to stabilise at around this 12.50 percent? I think on a sequential basis it is a tad bit lower.A: As I mentioned that it has an effect to the packaging film business but on the whole there has been an improvement in the packaging product business, packaging business what we do there has been an improvement by 2 percentage point on EBITDA level. However, the packaging film business which has been showing down in terms of the top-line as well as there has been some pressure on the margin too. So, obviously the overall gross margin put together both the businesses has not been shown very better. However, in time to come, yes, we expect this may go up to level of 14 percent on a whole by the year end. Then next year onwards because lot of other development has been done on the packaging business which is the high margin we expect to have a much higher EBITDA level margin in the coming years.(Copy edited by Rishma Kapur, interview transcribed by Vrushali Sawant)