• Global plastic consumption is expected to reach 297.5 million tons by 2015. Markets driving this growth will be the Asia Pacific region with the likes of India and China making swift progress in the medium to long-term period. The factors influencing this growth are development of new age plastics, emergence of new applications, and the focus on green chemistry due to legislative and environmental requirements

• Flexible packaging sector is expected to touch Rs 22950 crore by 2015 in India, results in growth in PET films and chips.

• So, the likelihood of having downward pressure on the BOPET prices in the current year is very low as there will be an improvement in the demand for BOPET film at both global and domestic level.

BOPET

• The Global BOPET film capacity in 2012 expected to be around 4000 Kilo tonnes while demand is expected to be around 3200 Kilo tonnes. The global demand for BOPET is expected to grow by 9% p.a. till 2015.

• Domestic BOPET film capacity in 2012 expected to be around 434 Kilo tones while demand is expected to be around 346 Kilo tones.

• The capacity addition of in BOPET films in 2011 at world level was approx. 180 Kilo tonnes while for 2012 it is expected to be approx. 650 Kilo tonnes. BOPET capacity in China was at around 1.0 million ton in mid of 2010, and that currently 1.10 million ton / year additional capacity under construction and due starting soon in 2012.

• The was a sharp rise witnessed in world in BOPET prices in FY2010-11 due to increased demand and tight supply. The benchmark 12 micron BOPET hit Rs 240-250/kg ($ 5,407-5,631/tonne) in October 2010 from around Rs 227/kg in September 2010, after nearly doubling its value from the start of the year because of strong demand. An increase in the use of the material in non-traditional areas such as garment embroidery, along with exports to the US and Europe - where BOPET production had started to fall - ate into available domestic supply, causing prices to shoot up. Moreover, Production capacities in the matured markets of USA, Europe and Japan declined and large growth was witnessed in Asia. Also many polyester film producers in the mature markets shifted towards making specialty products. This led to a bigger demand and supply gap and subsequently caused global demand outstripping the global supply.

• However, the global BOPET-film shortage has eased to the point that supplies are now plentiful and new capacity coming on stream before 2015 will ensure that the uncertainties of 2010 will not return in the short to medium term. Prices have eased considerably on the availability of extra volume from India and softening of demand, probably due to the running down of stocks built up at the end of 2010. The Indian government's decision to ban BOPET-laminate packaging for packing tobacco & pan masala has further improved supply, and new investment is also planned by the emerging global players based in India and China.

BOPET Film Prices

Raw Material Prices

Conversion Cost of BOPET Film of Uflex

• Photovoltaic (PV) cell production has now largely shifted to China while the UK has halved subsidies for domestic electric generation, which has payback on these and dampened demand.

BOPP

Quarterly average film grade PP prices and BOPP film prices in the global and domestic market

• Flexible packaging sector is the most important end user of BOPP films. it accounts for around 80% of world BOPP film demand. Global BOPP film capacity in 2012 expected around 8600 Kilo tonnes while demand to be around 6500 Kilo tonnes. Global BOPP Film demand is expected to grow by an average of 7% per annum to reach 7.7 million tonnes by 2014. Growth in Asian demand is expected to account for a vast majority of the predicted world growth over the next five years.

• The end user Industries of BOPP Films are: food packaging, non-food packaging, overwrap, print & pouch and base film for adhesive tape

• The present prices and the margins on BOPP films are good and it is not expected any major improvement in the BOPP margin consequent upon the fall in PP prices globally since any drop in PP prices will be passed to the customers until demand position is stronger than the supply.

• Metallised BOPP capacity of Uflex is around 9600 TPA. The differential price for metallised BOPP film over plain BOPP film is range bound, as the price of Metallised BOPP film is Rs 15 to 20 per kg more than the price of Plain BOPP film

Printing Inks

• The capacity utilization for Uflex's ink business has been more than 90%. However, the level of capacity utilization in the printing inks division depends on the type of printing ink to be produced. Producing Inks with different viscosities results into different level of capacity utilization as producing Ink with low viscosity will lead to a higher level of capacity utilization. The company has ink business as a separate division.

• Printing Ink growth is expected around 25% annually. The company is targeting to improve the overall margins of this business by changes in product mix and better productivities.

Financial Highlights

• The company's net profit for the nine months ended December on consolidated basis has decreased by 60% to Rs 204.6 crore. Also on a sequential basis, the consolidated net profit of the company has been consistently falling for four quarters in succession, and crashed by about 80% from Rs 251.47 crore in the quarter ended December 2010 to mere Rs 51.18 crore in the quarter ended December 2011. The lower profit during the current FY2012 has been mainly due to the drop in Gross Margins of BOPET films, which were exceptionally high during FY 2011 globally due to the mismatch in demand and supply and is now heading gradually towards normal margin level. Therefore, the company is optimistic about sustaining an improvement in consolidated profits from hereon

• The fee income on standalone basis for nine months ended December is Rs 44.94 crore, which includes license fee as well as technical fee received.

• The consolidated debt has marginally gone up from Rs 1369.44 crore as of March 2009 to Rs 1411.25 crore by March 2011. The company went for expansion which took place during last two financial years i.e. FY2009-10 & FY2010-11. It has taken loan for expansion of Mexico and Egypt projects. There are repayments taking place for the existing loans. The company expect to retain the Debt equity within 1.

• The current assets of the consolidated entity at Rs 2006.05 crore as of March 2011. The total current Assets include Cash & Bank Balance of Rs 278 crore, loans given of around Rs 50 crore and substantial amount of Rs 166 crore given as Capital Advances against project implementation. If these amounts are excluded, the balance Current Assets would amount to normal in relation to net sales for the year.

• The overseas expansion of Egypt & Poland has been done by the company's Dubai's subsidiary. As a result, the funds have been used for acquisition purpose rather than payment of dividend to the parent company, which has resulted in fall in dividend received from subsidiaries from Rs 28.88 in FY2008-09 to Rs 13.42 in FY2009-10 to nil in FY2010-11. The company however expects to receive a reasonable amount of dividend from subsidiaries in future,

• One of the prominent concessions available to the flexible packaging sector in India was DEPB scheme. Duty Entitlement Pass Book Scheme in short (DEPB) was an export incentive scheme. In a move towards tightening fiscal policies, the government has already put an end to the DEPB scheme, effective from October 2011. However, all the 2130 items from the DEPB scheme have been incorporated into the duty drawback schedule. So, revenues of the exporters would not be affected as they are now availing concessions under duty drawback schedule.

Current Level of Duty Drawback on export of BOPET, BOPP and PET chips:

• The company's Jammu plants enjoy tax holiday under Income Tax, Excise and Sales Tax for a period of ten years (i.e. Partial / Full) from the commencement of production.

• The company is going for erection & commissioning of 17.46 MW Natural Gas based power house. The company installed and commissioned two 8.73 megawatt Natural Gas based generating sets, to meet the total power requirement of production at Noida plant. As cost control measure, company successfully commissioned Natural gas fired 2 engines with a total capacity of 2.126 MW (1.063 MW each) at Malanpur Plant.

• The company expects to close FY2011-12 with turnover of Rs 4500 crore and net profit of Rs 275 crore at consolidated level while turnover of Rs 3000 crore and net profit of Rs 125 crore at standalone level

Global capacities of Uflex Limited

The various group companies