Tri-Pak Films: Gearing up for flight

Much of Tri-Paks thunder has been stolen this year as the leading manufacturer of BOPP and CPP films in the country struggles with fluctuating input prices and rising imports of BOPP film at dumping prices in the country.
Consequently, despite the sky-rocketing growth of the FMCG sector in the country- which is the biggest consumer of Tri-Paks offerings- the companys top-line growth has remained less than stellar.
Posting a sales volume growth of 2.3 percent at the nine month mark, the firm has also been seeing major competition from manufacturers using raw material from Chinese and Saudi origin, which has been selling at dumped prices in the Pakistani market.
However, the real concern remains the companys margins, which have been rocky throughout most of the year.
Slipping down by 2.89 percentage points, there has been substantial pressure on the companys gross margin which has gone down to 15.3 percent at the close of the third quarter. These margin erosions have primarily been at the hands of fluctuations in the prices of crude oil and polypropylene granules, both of which are primary raw materials for the packaging films industry and are stocked up two months in advance by the company.
On the operational front however, things are only set to get better for the company, which has already gone through multiple expansion phases over the last years to cover the increasing demand for its products from the countrys FMCG sector.
Pakistans industry currently has an annual demand of 50,000 MT for packaging films, with Tri-Pak Films leading the market share. With Tri-Paks annual production capacity standing at 35,800 MT, the firm has largely operated at almost 100 percent capacity over the last two years and is set to maintain this utilisation rate for CY12.
However, as the figures have been showing, a hundred percent capacity utilisation is not doing the deal for the firm which should be showing growth proportional to the growth of the FMCG sector. But things are set to get better for Tri-Pak, with the new BOPP film line ready for commercial production onwards from the next quarter.
Beginning from Q4CY12, the companys new annual capacity from CY13 and beyond will stand at 75,800 MT, which is more than twice its current level. Consequently, with substantial growth expected in the demand for BOPP film - lead primarily by the FMCG sector in Pakistan- brokers from a leading brokerage house predict the companys sales volume to growth by 17 percent in the next year.

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Tri-Pak Films Ltd.

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(Rs mn)                      9MY11       9MY12         chg

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Net sales                    7,413       7,587        2.3%

Cost of sales                6,063       6,425        6.0%

Gross profit                 1,350       1,162      -13.9%

Gross profit margin          18.2%       15.3%           -

Distribution and other         154         177       14.9%

Administrative expenses        115         147       27.8%

Operating profit             1,081         838      -22.5%

NPAT                           589         439      -25.5%

Earning per share (Rs)       19.64       14.62      -25.6%

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Source: KSE notice