Key takeaways of the conference call

BoPET Film prices has surged to unprecedented levels globally on the back of supply-demand imbalance. This has percolated to the domestic market as well. While the global demand for polyester film is growing at 7% even when the economy growth at around 3% bodes well for the industry. The domestic demand is growing at about 15%.

Sales more than doubled (up 105%) to Rs 197.80 crore and the net profit was Rs 54.81 crore, a rise of 843%. The EBITDA margin for Q3FY11 at 45.1% (14%in Q3FY10) is at historic peak on the back of strong surge in global BoPET prices.

For the nine month ended Dec 2010 the sales was higher by 63% to Rs 455.42 crore and the net profit was up by 392% to Rs 98.25 crore. EBITDA margin for 9MFY11 increased to 36% from 16% in corresponding previous period.

Revenue mix is predominantly 91% from polyester film 8% from engineered plastics.

The Company has successfully commissioned a new Continuous Polymerization Plant (CP Plant) in the month of November, 2010. With the commissioning of this plant. Polymerization Capacity has increased from 36,000 MT to 107,000 MT per annum. And in the month of January. 2011, it has successfully commissioned a new BoPET Film Plant. With the commissioning of this plant, BoPET Film capacity has increased from 27.000 MT to 57,000 MT per annum.

Likewise in Nov 2010 it has successfully commissioned a new Metalizing Plant which has increased the metalizing capacity of the company from from 6,000 MT to 13,200 MT per annum.

Capex for 9mFY11 was Rs 200 crore largely funded by a mix of debt, equity, and internal accruals. While about Rs 55 crore is from internal accruals the balance is from debt (largely buyers credit).

Production for the nine month ended Dec 2010 was 21000 tonnes. The company expects a production of about 11500-11800 tonnes in Q4FY11 thus a aggregate production of 33000 tonnes for FY2011. Production for FY12 will be 57000 tonnes with the capacity utilisation being close to 100%.

Currently exports is 25%. With commissioning of capacity recently exports to rise to account about 40-45% of the revenue of the company.

Realisation was about Rs 215/kg in Q3FY11 12 micron carona. But the realisation has now corrected to about Rs 180/kg. In the meantime raw material cost (PTA and MEG price) has also gone up from 57/kg to 78/kg.

Demand supply is not balanced yet. Larger part of capacity creation is to happen only in the last quarter of CY2011. Though there is large capacity in developed countries i.e. US & Europe, they are still not competitive with Chinese or Indian. These unviable capacity are to be shut down soon.

The company is not expecting any immediate sharp fall in the prices. Though there won't be any sharp correction in prices, there will be some reduction in margin (from current peak levels) going forward with correction in prices as well as increase in raw material cost but see pressure by end of second half of next fiscal.

Polyester film applicable in flexible packaging industry. More and more products are packed in flexible packaging. Expansion of middle class population is the growth trigger for domestic demand, which is expected to be strong going forward. Ester is second largest player in thin film market in the country.

BOPP and PF is very much segmented. While BoPET offers better oxygen barrier for packing products such as pototo wafers/chips, cofee etc., the BOPP is better for packing products which require moisture barrier such as Cigarette etc.

Margin in film grade PET Chips are not large as it is a intermediate product and there is not large customer base in the close proximity of the plant.

Price of metalized films will cost Rs 20-25/kg more.

The demand for Engg Plastic is very positive going forward. The company make compound engg plastics catering to auto, electrical and electronics industry. There is no dearth of demand from this user industries. The sluggishness in Q3FY11 is on account of longer time taken in getting OE approvals.

Continuous polymerisation is for manufacturing Raw material for polyester film. This capacity expansion of 70000 odd tonnes is to take care of the new polyester film lines.

Share of demand from Gutka and pan masala industry for polyester film industry demand is about 20-25%. The industry is to seek remedy.

The loss of gutka sales is more than compensated by increase in exports.

Older capacity are using a technology involving conversion of PTA&MEG to PET chip and then to BoPET Films. In this method there will be 1.5% wastage. However the capacity uses direct melt casting technology which is energy efficient. Ester is the third player in the world and second in India along with polyplex to use this technology.

No dumping of China into India.

Currently the depreciation will be about 15-16 crore a year and with new capacity additions the depreciation will go up to Rs 24 crore.

The average cost is 6-7% for additional debt of Rs 150 crore. And the total interest cost for FY12 will be about Rs 24-28 crore.

Downstream application of PF to Plasma TV and Solar Panel it is a lucrative segment for this the company has to acquire technology.

The company focused on value added products and the company's R&D team is working hard. The value added products offers higher margin. About 30-40% of our production to go to value added products.

The capex for engineered plastic products is very small. Capex for putting up a capacity of 90000-10000 tonne size is only about Rs 6-7 crore. By March 2012 the company will achieve 100% capacity utilisation and by Q3FY12 it will initiate fresh capex for this division.

Viable size for PF plant is 30000 tonnes for which capital expenses (only hardware cost excluding pre operating expenses & land cost) will be about 180-200 crore in case of brownfield.