Covid-19: Packaging industry sees higher volume growth in June-qtr

Packaging firms have witnessed higher volume growth and better earnings in the April-June quarter, helped by a rise in consumption of packed products amid the coronavirus lockdown, according to industry players.

Major players such as Uflex, Cosmo Films and Essel Propack have gained from increased demand for products like handwash and hand sanitiser as well as food items.

Uflex Ltd had last week reported an over two-fold jump in consolidated net profit at Rs 196.54 crore for the quarter ended June 2020.

"Due to the pandemic, consumption trends have witnessed a shift and flexible packaging has gained much more importance especially because of the hazards attached to non-packaged products. This resulted in higher production and sales volume," the company said in its earnings statement.

 

According to Uflex President (Finance and Accounts) and CFO Rajesh Bhatia, the COVID-19 pandemic triggered a multi-fold increase in demand for personal hygiene categories such as handwash and hand sanitiser and essential food.

"From a flexible packaging perspective, a lot of demand was seen in single-use packs for sanitisers. The liquid handwash category, which is estimated to have doubled, has seen a spurt in consumption of large 750 ml refill packs packed in spout pouches.

"For food packaging... essential items, example flour, rice, edible oils... experienced a swell in demand due to increase in home consumption and aggregation towards the organised market," Bhatia told PTI.

Expressing similar views, Cosmo Films CEO Pankaj Poddar said pent-up demand from the previous quarter and improved supply helped in improving margins during the April-June period.

"The Company has posted EBITDA (earnings before interest, taxes, depreciation, and amortisation) of Rs 93 crore during Q1 FY21 on the back of higher speciality sales (up by 20 per cent) and improved operating margins," the company said in an investors' presentation.

Last week, Cosmo Films had reported a 69.15 per cent jump in consolidated net profit to Rs 46.99 crore for the three months to June.

"There are several reasons. One is that demand has gone up, second is pent-up demand because of the lockdown as there was short supply, speciality sales have gone up. People are moving towards more hygienic packaging material," said Poddar.

Business in both food and hygiene segment is doing "phenomenally well" and the company expects to carry forward the growth momentum to the next quarter as well, he added.

Essel Propack posted a 74.60 per cent increase in profit before exceptional items and tax at Rs 77.56 crore, while revenue climbed 17.72 per cent to Rs 741.49 crore in the April-June quarter.

The company said it witnessed strong traction in the hand sanitiser segment and emerged as a leading supplier to key FMCG brands. It also saw "accelerated growth in personal care".

Essel Propack is the largest global specialty packaging company, manufacturing laminated plastic tubes catering to the FMCG and pharma space.

Meanwhile, Uflex said it is now seeing normalcy in demand.

"In the lockdown period, there was a temporary change in consumer behaviour that resorted to bulk buying and hoarding for the fear of stepping out and unavailability of items. The offerings from food and personal hygiene companies too focussed on large packs given the operating constraints at their end....

"However, as the economy started opening up gradually and supply chain was restored, we have been seeing normalcy in demand since July'20 onwards," Bhatia said.