Financial Daily from THE HINDU group of publications
Sunday, Oct 16, 2005
Financial Daily from THE HINDU group of publications Sunday, Oct 16, 2005 |
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Corporate
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Announcements Essel Propack plan to focus on US operations
Shyam G. Menon
Mumbai , Oct. 15 HAVING established itself as a global packaging major, Essel Propack Ltd's near-term focus will be to grow its US operations. "Our primary focus now is the US business where we are adding capacity," said Mr R. Chandrasekhar, Chief Operating Officer (Global), Essel Propack. The company plans to increase existing capacity in the US by 50 per cent in a phased manner until June 2006 to double its turnover there by 2007. Its growth engines in that market have been in the main segment, foray into the mini tubes segment, shifting of market share from other players to itself and the new market space that opened up through conversion of packaging from metal tubes to laminated tubes. "Further, the growth in oral and hair care segments also add to volumes," Mr Chandrasekhar said. While the US facility was originally set up to service the laminated tube requirements of Procter & Gamble, its customers have since grown to include others. Essel Propack had earlier indicated plans to spend $15 million on expanding its manufacturing capacity in the US. The US business had contributed roughly 15 per cent of Essel Propack's revenues in 2004. This is slated to edge up to 20 per cent in the current financial year. In tune with the rising share of its overseas business, foreign revenues are projected to make up for 66-70 per cent of Essel Propack's total revenues by the end of this year. For the year ended December 2004, the company had reported a net profit of Rs 80 crore on a consolidated global revenue of Rs 669 crore. Essel Propack, with its third quarter results due to be announced next week, is expected to turn in a better performance compared to the year-ago period. However, such improvement will be mainly due to the fact that 2004 was a sluggish year for the company and the laminated tubes industry. "If you take 2003 and 2005, then it has not been a spectacular growth," Mr Chandrasekhar said. The third quarter is also likely to showcase the effect of Essel Propack's additional capacities worldwide - like the facility in Russia beginning to kick in. But a continued cause for worry is the price of raw materials. Higher crude oil prices, resultant higher price in polyethylene and the impact of natural disasters on cracker units in the US have caused a steep increase in the price of speciality polymers. They have gone up by 20-25 per cent annually. Essel Propack has been cutting cost of production and doing R&D work to tackle the situation. It has also been studying for a while hedging products in polyethylene offered by the London Metal Exchange. Mr Chandrasekhar said Essel Propack, traditionally viewed as a company with an appetite for acquisitions, was not considering any such step at present. "We keep getting a number of offers for possible acquisition, but nothing substantial has surfaced," he said. In August 2004, it bought Arista in the UK. More recently, it bought Telcon Packaging, also in the UK. In the last one-month, shares of Essel Propack moved in the range of Rs 331-376. It closed at Rs 366.10 on Friday, down from the previous close of Rs 375 on the Bombay Stock Exchange.
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