Glory Films Ltd Management Discussions

Packaging Industry

The global plastic industry is witnessing continuous shift of production bases to low-cost Asian countries. This coupled with increasing foreign investments, and rise in the number of new manufacturing establishments are presenting Asia-Pacific as a prime driver of growth in the plastics industry. In particular, China and India offer enormous potential due to expanding automobile demand, resurgence in growth fundamentals across all end-use markets, such as rebuilding of consumer/business confidence, increasing income levels, rebound in general production, and rise in capital investments in all end-use sectors.

The global packaging industry witnessed influence of technology innovation and development, a key reason for the industrys robust growth over the last few decades. Over the years, technology development has been moving in sync with growing consumer demand for convenient and quality packaging. Eclectic packaging solutions, for instance, have evolved to offer exceptional product packaging advantages to manufacturers and consumers alike.

Besides growing demand from the automobile, mining, chemical, construction and agricultural industries, the Asia-Pacific plastics market is propelled by trends such as globalization, demand for durable products and urbanization Packaging sector is one of the major consumers of plastics. Apart from being used as a substitute for traditional materials, plastic packaging is being increasingly used in healthcare and personal care products, and packaged foods and beverages markets. Advancements in packaging material science and mounting demand for product protection and stability are further driving demand for plastic packaging. Bioplastic demand is on the rise and is expected to grow, owing to novel applications in the packaging industry, primarily for food and beverages. Emerging nations with underdeveloped or no recycling facilities are expected to benefit considerably from bioplastics products and packaging.

The global flexible packaging market (at $71 billion in 2011) will grow by around 5.0% a year, reaching $90 billion in 2016. Flexible packaging is an industry relatively immune from global economic downturns. In 2016, 42% of the industry will be in Asian markets, which are growing at about 7% a year - the fastest growing region is Southeast Asia and Oceania, driven by high demand in India with 15-20% annual increases. The global arena remains "local" with regional converters supplying the vast proportion of local packaged-goods customers needs. Only 4% of flex-pack production is traded outside the region in which it is manufactured.

Packaging in India

Today, packaging is produced more quickly and efficiently. It is generally lighter in weight, uses less material, is easier to open, dispense from, reseal, store, and dispose. Packaging has evolved from a relatively small range of heavy, rigid containers made of wood, glass, and steel, to a broad array of rigid, semi rigid and flexible packaging options increasingly made from specialized lightweight materials.

Encouraged by strong economic growth, stimulation in processed food production and retailing and the growing personal disposable incomes of the 350 million middle-income earners in India, will drive growth in the flexible packaging industry over the next five years averaging 15% per annum through to 2015. However, Indian Plastic Industry now faces double- edged sword as on the one side it faces low cost imports from China and Thailand due to slowdown in Global economy, particularly in USA and on other side increased cost of production due to rising prices of Polymer.

Flexible Packaging

Flexible packaging consists of multi-layer laminated sheets of plastics (PVC, LDPE, HDPE, BOPP BOPET), paper, cloth, or metal foils that are used separately or in combination for various packaging applications. However, this article discusses flexible packaging as laminates of plastics that have a unique set of properties that ensure toughness, moisture resistance, aroma retention, gloss, grease resistance, heat sealability, printability, low odour and taste. These find use in packaging food, tea, coffee, spices, chewing tobacco, bakery, confectionary, oils, and in certain other non-food applications such as household detergents, health and personal care, soaps, and shampoos.

Flexible Packaging Demand in India and Worldwide

Worldwide demand for converted flexible packaging is forecasted to grow 3.6 percent per year to over 19 million metric tons in 2013, faster than real (inflation adjusted) gains in GDP. Factors contributing to rising converted flexible packaging demand include growth in food and beverage shipments, which represent the largest market by far. In addition, cost performance and source reduction advantages, as well as ongoing developments in high-barrier resins and value added features, will continue to favour flexible packaging products over their rigid packaging materials.

Flexible packaging has reached market maturity in the developed nations of North America and Western Europe and future growth will be modest. However, in developing countries, the flexible packaging sees strong growth. Asia is the largest regional market with 29.1% of global market volume in 2011, followed by Western Europe and North America. Asia is also the fastest growing market for consumer flexible packaging, with a forecast CAGR for 2011-16 of 7.9%. The region is forecast to represent 55.0% of total world flexible packaging consumption growth during the period 2011-16. India and China are the fastest-growing national markets for consumer flexible packaging, together accounting for 44.0% of world flexible packaging consumption growth during the forecast period.

The Indian flexible packaging Market 2011 shows India represents a US$ 3 billion market that is expected to continue growing at around 18-20% a year until 2015. India is poised for huge growth with opening up of retail sector.

Opportunities & Threats:

Opportunities

• Rapidly growing economy resulting in rising demand for plastic packaging products in India and abroad.

• Flexible Packaging also has a strong outlook for barrier packaging, including stand-up pouches, non-retort stand-up pouches.

• Rapid growth in globalization in FMCG segment.

• Flexible Packaging vies for conversion opportunities from rigid packaging and already controls the Foodservice area. In general, flexible packaging continues to provide solid market penetration vs. aseptic and hot-fill rigid packaging, a trend most industry pundits believe will continue.

Threats

• Raw material availability and its prices shooting up due to unforeseen circumstances (Petroleum prices).

• The competition is increasing with the addition of new capacities. Increased competition leads to reduced price, decreased sales, lower profit margins thus adversely affecting the business and financial conditions of the Company.

• Inadequate management controls arising from the massive increase in scale of operation might result in losing market share and profits.

Internal Control Systems and their Adequacy

The Company has in place adequate internal control systems and procedure commensurate with size and nature of the business. These procedures are designed to ensure:

• That all assets and resources are used efficiently and are adequately protected;

• That all the internal policies and statutory guidelines are complied with; and

• The accuracy and timing of financial reports and management information is maintained. Human Resources/ Industrial Relations

Industrial relations remained cordial during the year. Employees competencies and skills were enhanced by exposing them to several internal and external training programmes. Additional efforts continued to be implemented with a view to obtain commitment and loyalty towards the organisation.

Cautionary Statement:

Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

	For and on Behalf of the Board of Directors
Place: Mumbai	Yogesh P. Kela
Date: 12th August, 2013	Chairman and Managing Director