The coronavirus pandemic has opened up opportunities for innovation. Uflex, an FMCG and pharma package manufacturing firm expects COVID-19 to propel the development of sterile and anti-microbial packaging solutions.
In an interview with Moneycontrol, Rajesh Bhatia, Group President (Finance & Accounts) & CFO UFlex said: “Post COVID-19, the focus will be back on sustainable packaging including Recycling and Biodegradable packaging, which will continue to drive all conversations in the industry.”
On the impact of COVID-19 on packaging sector and Uflex, Bhatia said, the business segment of ‘Flexible Packaging Films and Packaging’ in which UFlex operates is indispensable to FMCG (food packaging) and Pharmaceutical packaging and has remained unscathed. UFlex could continue its operations even during the lockdown, he said.
The company expects to achieve revenue growth of 12-15 percent in FY21 over FY20, as the new projects are commissioned during the year and it sees higher capacity utilisation levels at existing plants.
Edited excerpts from the interview:
What is the impact of COVID-19 on flexible packaging sector and UFlex? How long do you think your sector will take to come back on track?
A. The outbreak of COVID-19 has plunged the global economy into its worst recession and many businesses will witness de-growth. Fortunately, the business segment of ‘Flexible Packaging Films and Packaging’ in which UFlex operates is indispensable to FMCG (food packaging) and Pharmaceutical packaging and has remained unscathed and UFlex could continue its operations even during the lockdown.
While we faced multiple challenges during the initial days of lockdown such as shortage of labour and irregularities in the supply chain for the movement of raw materials and finished goods, we clearly lead the industry in ensuring continuity of supplies of packaging for essential items such as food and pharma.
You will see that COVID-19 will actually result in a surge in demand for our products globally as people tend to consume more of packaged stuff at home and a multi-fold increase in demand for hygiene category products, particularly hand wash and sanitizers.
What were the major challenges that the company faced during COVID-19?
A. In India, the lockdown was absolutely complete and immediate. While the Industry engaged in manufacturing essential items were allowed to operate, the initial ruckus resulted in certain challenges such as a) Governmental approvals for operating the plants, b) Transportation of raw materials and finished goods and c) Labour shortages etc. It took some time for the things to settle down particularly on the transportation side which affected the supply chain substantially.
However, at our international locations, there were no such challenges as the industrial units were not subjected to lockdown.
Considering the debates and impact of growing plastic waste what are the sustainability initiatives taken by UFlex?
As a manufacturer of flexible plastic packaging, we are cognizant both of the value of this commodity as well as the threats that uncollected waste poses. We have tried to hit the nail on its head by launching a global sustainability initiative Project Plastic Fix’that uses a mix of methodologies practised at UFlex to transform plastic waste to wealth that helps to keep plastic within the economy but out of the environment, thereby turning plastic waste into a valuable commodity again. These methodologies are; recycling multi-layer packaging waste into granules which are further used to make several household and industrial essentials articles such as dustbins, paver tiles, outdoor furniture, road dividers etc. ; converting plastic bottle waste into green packaging films Asclepius; and reprocessing plastic waste into fuel through Pyrolysis, which emits zero carbon emission so what could have been burnt is reused to produce energy.
UFlex is also working to launch a Biodegradable and Recyclable renewable solution product that will convert uncollected plastic waste/ laminate waste into biomass, upon degradation.
As part of Project Plastic Fix, UFlex has recently commissioned India’s first washing and recycling line at Noida that will upcycle post-consumer PET Bottle waste into chips and Multi-layered plastic waste into granules which are then used for endless applications.
What is the kind of technology or innovation that the packaging sector can expect post-COVID-19? Any Global expansion plans?
A. In our view, COVID-19 could propel the development of sterile and anti-microbial packaging solutions. Post COVID-19, the focus will be back on sustainable packaging including Recycling and Biodegradable packaging, which will continue to drive all conversations in the industry.
As part of our global expansion plans, we are expanding our packaging films capacity and presence by setting up three greenfield manufacturing facilities at Russia, Hungary and Nigeria and one brownfield expansion at Poland.
How is your business in Mexico, Poland, Egypt and the USA faring?
A. All our international locations have manufacturing plants for packaging films and over the years, the capacity utilisation levels at all locations have increased steadily which has led to higher revenues and profitability. While Poland, USA and Egypt are operating at their peak capacity utilisation levels, we expect Mexico to achieve peak capacity utilisation in FY21.
How much do global markets contribute to your sales?
A. At present, sales from our offshore locations are about 45%- 48% of total sales but going forward from FY 21 onwards, with the commissioning of new under-construction projects, sales of offshore locations will become substantially higher and will be well above 50%.
We understand you have also ventured into PPE. What triggered the thought for developing the PPE?
A. The main reason behind the development of this PPE coverall was the lack of breathability in the existing PPE kits that are being used by our frontline workers to treat the coronavirus patients. Also, the kits used currently are made up of thick fabric and cause discomfort during long wear. It was also observed that the PPE kits have certain gaps that provide a limited barrier against the virus from entering through the stitches and openings.
‘Flex Protect’ Coverall’ is an answer to these shortcomings which comes with an advantage of better breathability and anti-microbial coating giving complete protection against coronavirus to our frontline workers. It allows 30% better breathability and confirms to ISO 16603 standards. With Flex Protect Coverall we also have enhanced the safety of the health workers by up to 100%, as the fabric is coated with anti-microbial properties which are certified by South Indian Textiles Research Association (SITRA)
What is the kind of sale you are expecting from PPE?
A. We are participating in government tenders in the initial phase and then it will be retailed via chemists and e-commerce stores. It is difficult to put a sales number at this initial stage but our internal target of annual sales is Rs. 200- 300 crore.
Have you converted an existing plant for developing PPE?
A. We have been able to develop these PPE Coveralls by making just a few adaptive changes to our existing plant.
What is the overall industry outlook?
A. We are extremely upbeat on the flexible packaging industry and despite the environmental concerns, which surely are addressable, we see much higher growth in the future for the Industry, on an overall basis. It has the least carbon footprint when compared to the alternate packaging solutions.
Even during this unprecedented global pandemic of COVID-19, the flexible packaging industry has stood rock solid and has played a huge role in ensuring continuous supply chain of essentials like food and pharma, by providing a sustainable packaging solution.
The flexible packaging industry is continuously providing new and innovative packaging solutions, thereby replacing rigid packaging, which has led to its growth over the years and with COVID-19 bringing in a behavioural change leading to much higher consumption of packaged food at home and multifold increase in consumption of hygiene products, it will give a further boost to the Industry.
What are your revenue expectations for FY21?
A. I think on a conservative estimate, we should achieve revenue growth of 12-15% in FY21 over FY20, as the new projects are commissioned during the year and we see higher capacity utilisation levels at existing plants. However, in FY22 we will witness full year operations of the new projects, which will give a huge boost to the revenues and profitability.
What is the kind of volume growth you are expecting?A.
With our plans to enter new markets, we forecast an annual volume growth of close to 15 percent.