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Packaging film companies likely to see improved profitability to 19% in FY21: Crisil

19 Feb 2021 Evaluate

Ratings agency Crisil in its latest report has said that packaging film companies are expected to see an improved profitability at a decade high of 19 percent in the current fiscal year (FY21) on the back of robust demand, growing in-home consumption, and benign input costs, among others. An analysis of Crisil-rated flexible packaging film companies, which account for over 60 per cent of the industry's revenue and debt, indicates brightening of their credit outlook over the near-to medium-term amid stable debt levels.

According to the report, with demand estimated to have been growing at around 12 percent this fiscal, and prices of inputs – mainly crude derivatives – down round 20 percent, prospects of packaging film makers have started to improve. It expects EBITDA (earnings before interest, taxes, depreciation, and amortization) margin to expand 400 basis points (bps) on-year to 19 percent this fiscal. Larger companies that are also into speciality and value-added products will benefit the most.

The report further said broadly, flexible packaging companies manufacture bi-axially oriented polypropylene (BOPP) and bi-axially oriented polyethylene (BOPET) films. It also said BOPET films have more oxygen retention power, high tensile strength, longer shelf life, and better print quality than BOPP films, resulting in diverse end-use applications. 

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