MANAGEMENT DISCUSSION & ANALYSIS OVERVIEW Jindal Poly Films Limited (JPFL) is a leading producer of high performance Polyester and BOPP films (plain, metalized and coated) mainly used for the flexible packaging industry. The Company's manufacturing facility at Nasik is the world's single largest location factory for producing these plastic films. The Company's manufacturing units are amongst the most modern facilities available and are capable of producing high quality products. After acquiring the BOPP films division of ExxonMobil, JPFL has become the largest producer of BOPP films in the world with a combined capacity of 4,45,000 TPA. ExxonMobil is known globally as a reputed manufacturer of BOPP films. Now the Company has five manufacturing locations - two in U.S.A. and three in Europe in Italy, Belgium and Netherlands. Now the Company has become a leading supplier of specialty BOPP films and top coated BOPP films to the leading global brand owner in food, beverage and confectionery. INDUSTRY, STRUCTURE & DEVELOPMENTS Flexible Packaging Film Flexible packaging typically includes materials such as plastic films, paper and aluminum foil. Over the years, BOPET Film and BOPP Film (forms of plastic-based flexible packaging film) have become the brferred choice for packaging consumer articles including food, personal products and clothing. Besides such films, JPFL also offers a range of metallised and coated film products to its customers for increased barrier properties and higher self-life of products. JPFL is the leading producer of flexible packaging films in the country. The Company also maintains a strong brsence as a key exporter to several countries. Flexible packaging film follows a business-to-business model, supplying base film to key converters/ processors - who in turn sell the value added product to end users. BOPET Film BOPET Film is a versatile product broadly classified according to thickness of the film. Thick Films (50-350 microns in thickness) find application in photographic/X-ray, electronics, printing, textile, br-brss back up films, for photo voltaic cells used for generating solar power and office supplies, motor insulations photopolymer plates and document lamination. Thin Films (upto 50 microns in thickness) are used in flexible packaging metallic yarn, cables, transformers, capacitors, audio/video tape, hot stamping foils, release films, decorative ribbons and labels. JPFL has recently launched an opaque white polyester film with an off line coating on both sides to replace paper in the photographic printing industry. This film is increasingly finding popularity in the photo album segment. The Company's opaque white films have made significant entry in the label face stock application for the replacing paper JPFL has a capacity to manufacture 1,27,000 TPA of BOPET Film. BOPP Film Better moisture retention properties render BOPP Film more suitable for food products like snack foods, biscuits, pasta, dried foods and woven polypropylene bags. Further, BOPP Film also finds application in over wrapping of cigarettes, C.Ds, cassettes perfume cartoons wrapping cigarette cartons, ready-made garment bags, adhesive tapes and print lamination. JPFL has a capacity to manufacture 2,10,000 TPA of BOPP Films. Metalized Films Vacuum deposition of Aluminium on BOPET and BOPP films increases the barrier properties of such films. Besides flexible packaging metalized BOPET films is used for metallic yarn. Metalized BOPP is widely used for gift wrapping. In the last few years metalized polyester film has found application in sequences for the textile industry for sarees and dress material for women's wear. However the largest application of metalized BOPET and BOPP films continue to be in the flexible packaging segment. Coated Films PVDC coated BOPP and BOPET films are used in the flexible packaging industry. The Company has a capacity of 4500 TPA to manufacture PVDC, Acrylic and LTS coated films. During the current financial year the Company's silicon coating and other coated films have found wide range of applications in the label stock and flexible packaging industry. Jindal manufactures various grades of BOPP films, like heat seal film, tape & textile film, metalized films, pearlized films, opaque film and specialized grades like top coated, low SIT heat seal, high barrier metalized. CIN No.L17111UP1974PLC003979 Acrylic coated BOPP films has been developed by the Company which is replacing import in the bottle label application. Coated and Specialty Film Among Asian countries, India emerging as one of the leading future growth markets based on the rise of the young, urban, increasingly affluent Indian consumer. Latest market studies indicates 20 to 30 % annual growth in packaging converting/process segment. Jindal Poly Films Ltd. plans to offer widest range of innovative coated & speciality films to India & Global markets. With rising demands for enhanced shelf of food and snacks products, Jindal Poly Films Limited, is committed to full fill market demands with best quality coated films supported by strong R & D technical after sales customer support. Polyester Chips JPFL has the in-house ability to manufacture polyester (BOPET) chips as per the product requirement, for its BOPET Film business. The Company has installed capacity of 1,76,400 TPA at Nashik, Maharashtra. OPPORTUNITIES AND THREATS BOPET Film The company produces both types of BOPET Films (thin 8-36 microns) and thick (50-350- microns). Thin BOPET films constitute nearly three fourth of the worlds consumption of BOPET films and is mainly used in packaging. Industrial and electrical uses constituting over 90% of global consumption. The use in high end segments like imaging and magnetic media has reduced to below 10% owing to development of digital technology. Flexible packaging improves the shelf life of products while increasing its product appeal. Increase in purchasing power in the developing countries has resulted in a significant rise in per capita consumption of flexible packaging materials. Asia (excluding Japan and Korea) has emerged as the largest market for BOPET films accounting for nearly 50% of the world consumption. However the penetration of flexible packaging in the developing economies in Asia is still low and huge opportunities exist for growth with the increase in organized retail, small serve packs and increasing consumerism all requiring better and attractive packaging. In the year 2014-15, prices of BOPP films recovered due to higher demand on account of capacity expansion by flexible packaging manufactures. However, in the year 2015-16, the prices of BOPET film will have a threat from import from China and Asian Countries due to capacity expansion in China and lower import duties from Asian countries under the FT Agreement with India. Thick BOPET films experienced increased demand from new products like flat panel displays, LCD films and from Photo Voltaic panels. However the production of these high end products was limited to established producers in U.S.A., Europe, Japan and Korea. Penetration into China and India has not yet happened, but is expected in the next few years. BOPP Films The global BOPP industry is dominated by China which accounts for nearly 40% of the global capacity and consumption. The capacity utilization in China has been around 70% for the last few years. The Chinese market itself is growing at an average rate of around 8% p.a. It is also observed that Chinese cost is increasing compared to brvious years largely due to reduction in subsidies. This has allowed prices of JPFL's products to increase both in the domestic and international market. Frequent price fluctuation of crude coupled with foreign exchange fluctuation may have impact on finish product prices. SEGMENT PERFORMANCE Flexible Packaging Film The flexible packaging gross turnover was Rs. 2732.50 crore (2014-15) as against Rs. 2848.50 crore (2013-14). OUTLOOK Flexible Packaging Film India is leading the growth in the global flexible packaging films, growing at above 12% per annum over the last few years. This growth is powered by increased penetration of packaged food and personal products in to the semi urban and rural segment. In tier 2 and tier 3 cities, the average pack sizes are usually smaller than the pack sizes in tier 1 cities. This results in increased use of flexible packaging consumption in the FMCG industry. As the Government is increasing its spending in the rural economy, increased demand for FMCG products is experienced in the hinter lands of India. The growth is likely to intensify in the next 2 - 3 years. Growth in the flexible packaging industry is also aided by increase in the export of packaging material to high cost countries in Europe and the U.S.A. BOPET Films Over the last ten years, the dominance of the four leading producers - TORAY, DUPONT-TEIJIN, MITSUBISHI and SKC has been challenged by a new emerging breed of producers in India and China. These companies including Jindal Poly Films have identified an opportunity to gain market position through investment in low cost and highly efficient modern thin film extrusion plants and in doing so, have found their way in to the exclusive club of large producers. BOPP Films The BOPP film market in India is increasing owing to increased consumption in food packaging and large growth in textile packaging. Almost two thirds of the world's production of BOPP is consumed in food packaging. In India the consumption for food packaging is only one third of production. This gap is rapidly being bridged as the customers are increasing displaying a strong brference for hygienically packed food products. Combined with a robust growth in ready to wear apparels, the Indian BOPP film industry is expected to grow at over 15% per annum over the next 3 years. RISKS & CONCERNS Input costs The largest component of costs involved in making flexible packaging film is attributable to raw materials. The BOPET chips used to make BOPET Film as well as the polymers that go into producing BOPP Film are derived from petroleum. Given the volatile trend in crude oil and demand for polymers for competing applications the brssure on input costs can be expected to fluctuate. Flexible packaging film makers have thus far been able to pass on these costs to end consumers and are expected to do so in the foreseeable future. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY JPFL employs stringent controls to ensure the safety of its asset base against loss and misuse. Further, enterprise wide adherence to corporate governance best practices is achieved through a combination of internal audits, management reviews and audit committee. The Company is thus able to secure and validate its business transactions on an ongoing basis and thereby maintain the accuracy of its financial records and the safety of its property. FINANCIAL PERFORMANCE Jindal Poly Films reported a gross revenue of Rs.2732.50 crores as compared to Rs. 2848.50 crores in brvious year. The Profit after Tax stood at Rs.153.26 crores (last year Rs. 83.29 crore) giving an EPS of Rs. 36.45 (last year Rs.19.8) HUMAN RESOURCES & INDUSTRIAL RELATIONS Today, intense competition between products and services of uniformly high quality is the norm of the day. Even the latest and modern machinery with most competent technical backup does not ensure success against fierce competitions. That is brcisely why we have built our growth plans on the brmises that our manpower resources are our most valuable assets. All other resource have to be acted upon by this resource for their value to be realized. All our efforts in human resource development need to focus on developing a keener perception and a superior performance in servicing the needs of the customer at a lower cost and in a shorter time frame. Therefore, our emphases have been on developing competent leadership and team building with focus on customer satisfaction. It is well recognized by us that customer is the prime reason for our existence and the entire team must focus on this critical fact that he needs to be well satisfied. Only then will this objective find basis in reality and only then will all other aspects of HRD - communication, problem solving, stress management etc. will have a measuring scale. Our aim in the coming year would be to build our self as a "Learning Organisation" - an organization that continuously anticipates changing environments and uses change proactively to actualize its strategic business plan more rigorously. Your company has excellent industrial relations which induces the right culture for an efficient working, Besides, your company also provides a large number of welfare measures for the employees and their families in the units. This ensures that there is a sense of belonging to the company, which goes a long way inforging an excellent environment in the workforce. CAUTIONARY STATEMENT Certain statements in the Management Discussion and Analysis describing the Company's views about the industry, expectations/ brdictions, objectives etc. may be forward looking within the meaning of applicable laws and regulations. The future being uncertain, there cannot be any guarantee that the assumptions and expectations made will be realized. Actual results, performance or achievements and risks and opportunities could differ materially from those exbrssed or implied in such forward-looking statements. The Company undertakes no obligation to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events. The management discussion and analysis should be read in conjunction with the Company's financial statements included herein and the notes thereto. |