UFLEX LIMITED
Q1 FY26
Call date · August 18, 2025
1 · Management Commentary
Key Positives
- Revenues up 6.5% YoY to Rs. 3,922 crores, driven by 7.9% volume growth.
- Packaging segment volumes grew 11.7% YoY; packaging films up 6.8% YoY.
- PET resin plants achieved high utilization: 97% in India, ~75% in Egypt (first quarter of operations).
- No exceptional forex losses this quarter (vs. Rs. 180 crores last year).
- Flexible Packaging business volumes up 7.4% YoY; Liquid Packaging up 18% YoY.
- USMCA coverage allows nil duty on exports from Mexico to US, providing a competitive edge.
Key Negatives
- EBITDA margin declined to 12% (vs. 12.7% YoY).
- Tariff uncertainties in US and higher-than-expected US tariffs on Indian products.
- Capacity utilization dropped sequentially in Dubai, Nigeria, Poland, and Mexico.
- Delay in Aseptic Packaging capacity expansion from 7 to 12 billion packs.
- Increased imports from Southeast Asia and China impacting BOPET margins in India.
Forward Guidance
- CAPEX: Rs. 2,000 crores planned; Rs. 1,100 crores spent as of June 30, 2025; balance Rs. 900 crores to be spent in FY26 and Q1 FY27.
- Aseptic Packaging expansion (India) delayed; expected commissioning in early H2 FY26.
- Greenfield Aseptic Packaging plant in Egypt and WPP bags facility to be commissioned in FY26.
- Noida recycling facility to be ready by year-end, aligning with government recycled content mandates.
- New investments expected to add Rs. 3,000 crores revenue and Rs. 600 crores EBITDA at 85% utilization.
- Revenue growth guidance for FY26: ~10%; EBITDA target Rs. 2,100 crores.
- No major new capacity additions planned in BOPP/BOPET globally in the next three quarters.
2 · Q&A Highlights
Q 1 (Aseptic Packaging Expansion): What is the status and expected impact of the delayed Asepto (Aseptic Packaging) expansion?
A (Management):
• Commissioning delayed to early H2 FY26; full benefit to accrue from January 2026 season onward.
• FY26 Asepto volume guidance revised to 8.5–9 billion packs (vs. earlier 10 billion).
Q 2 (Capacity Utilization & Regional Performance): Why did capacity utilization drop in Dubai, Nigeria, Poland, and Mexico, and what is the outlook?
A (Management):
• Nigeria impacted by US tariffs and customer pre-stocking; Poland affected by Indian exports (now reversing); Dubai’s drop due to plant shutdowns, not market issues.
• Expect normalization in Nigeria and Poland in coming quarters.
Q 3 (Tariffs & Global Trade): How are US and global tariffs affecting business, especially exports from India and Mexico?
A (Management):
• US tariffs on Indian products higher than expected; Mexico-to-US exports benefit from nil duty under USMCA.
• Tariff uncertainties expected to resolve in coming quarters, potentially improving margins.
Q 4 (BOPP/BOPET Margins & Overcapacity): Are BOPP/BOPET margins bottoming out, and when will overcapacity ease?
A (Management):
• BOPET margins have bottomed out; improvement checked by higher imports from Southeast Asia/China.
• Overcapacity in BOPET may persist for two more years; BOPP margins improved post-industry incident.
Q 5 (Flexible Packaging & Recycling): What is the outlook for Flexible Packaging and the new recycling business?
A (Management):
• Flexible Packaging volumes and margins improved; limited scope for further volume growth without new investment—focus shifting to higher value-added products.
• Recycling facility (40,000 tons initial capacity) to be operational by year-end; business expected to grow as regulations stabilize.
Q 6 (CAPEX, Debt, and Returns): What is the expected revenue/EBITDA from new projects, and how will debt evolve?
A (Management):
• New projects (Aseptic Egypt, WPP, recycling, Sanand debottlenecking) to add Rs. 3,000 crores revenue and Rs. 600 crores EBITDA at peak.
• Net debt-to-EBITDA to peak at ~4.1x, then decline below 3x as new projects ramp up and repayments continue.
Q 7 (Cost Structure & Margins): Why have costs (employee, power, fuel) risen faster than revenue, and how sustainable are current margins?
A (Management):
• Cost increases partly due to fixed/semi-fixed nature; margins expected to improve as pricing and volumes recover in coming quarters.
Q 8 (Product Innovation & EPR): What is the significance of the single-pellet solution and new product developments?
A (Management):
• Single-pellet solution (70% virgin, 30% recycled) supports EPR compliance and customer convenience; ongoing focus on product innovation to maintain industry leadership.
3 · Other Key Numbers
- Q1 FY26 revenue: Rs. 3,922 crores
- Volume growth: 7.9% YoY (excluding PET resin)
- Packaging segment volume growth: 11.7% YoY
- Packaging films volume growth: 6.8% YoY
- PET resin capacity utilization: India 97%, Egypt ~75%
- Flexible Packaging volume growth: 7.4% YoY
- Liquid Packaging volume growth: 18% YoY
- Holographic Films volume: -5% YoY
- Asepto Q1 volume: 2.3 billion packs
- FY26 Asepto volume guidance: 8.5–9 billion packs
- Film division production guidance: ~132,000 tons per quarter
- Total planned CAPEX: Rs. 2,000 crores; Rs. 1,100 crores spent as of June 30, 2025
- Net debt: Rs. 7,300 crores
- Net debt-to-EBITDA: currently 3.90x, expected peak ~4.1x, to decline below 3x post-projects
- Scheduled annual debt repayment: Rs. 1,300 crores
- Expected additional revenue from new projects: Rs. 3,000 crores
- Expected additional EBITDA from new projects: Rs. 600 crores
- Q1 FY26 EBITDA margin: 12% (vs. 12.7% YoY)
- No exceptional forex losses this quarter (vs. Rs. 180 crores last year)
- Recycling facility initial capacity: 40,000 tons
- No major new BOPP/BOPET capacity additions globally in next three quarters (except SRF, Nahar, Dhunseri in India)
- Realization in BOPP: 35% margin over raw material cost (as stated)
- USMCA: 70% of Mexico production exported to US with nil duty
- Aseptic Packaging expansion (India): from 7 to 12 billion packs (delayed)
- Aseptic Packaging greenfield (Egypt): 12 billion packs (to be commissioned FY26)
- WPP bags (Mexico): 18,000 MT plant ramping up Q1/Q2 FY26