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Exchange rate fluctuation and smuggling are two factors that pose a constant risk to Tri-Pack Films Limited’s performance. Given the rupee performance during 2019, it is not surprising that the company experienced a rise in its costs of production.

Net revenue of the company improved by 11 percent year on year in CY19 as plant was shut down for up gradation in CY18, which resulted in production loss, in addition to volatility in prices that made customers delay their placement of orders.

A glance at quarterly results reveals that revenue improved particularly in the last quarter, which was more a factor of business restoration after the slowdown experienced in 1HCY19 due to change in policies in order to document the economy. Majority of Tri Pack Films’ customers were from the unregistered sector. With an adjustment of government policy, customers delayed business activity in the hopes of a reversal, explained by lower sales figures for the third quarter of FY19.

During CY19, the company claimed to improve its working capital efficiency in order to hedge against rising interest costs. It seems to have done a decent job since its finance costs have been curtailed in the last quarter for 2019 when compared with the elevated levels during the second quarter. The exceptionally high finance costs in the second quarter were a result of increase in policy rate by 476bps along with an exorbitant exchange loss of Rs94 million which was compared to period of CY18. Finance cost for CY19 saw an over 60 percent increase as a result.

In addition to the elevated finance costs, company’s tax costs have also risen abnormally. Channel checks suggest that it was a result of full and final tax cost imposition at the import stage, irrespective of profitability.

Third quarter of FY19 saw a reduction in loss while bottomline turned positive in the last quarter. While no major shift was seen in other heads, a significant hike in other income lifted the earnings, which was largely due sale of company vehicles along with other miscellaneous items. With the restoration of the business, the company hopes that numbers will improve in the future.