Ester Industries Ltd. — Interim / Quarterly Report 2019

Aug 13, 2019

BSE Limited Department of Corporate services Phirojee Jeejeebhoy Towers Dalal Street, Mumbai - 400023	National Stock Exchange of India Limited Exchange Plaza, Plot no. C/1, G Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400051
Scrip Code: 500136	Symbol: ESTER

Q1 FY20 RESULTS PRESENTATION

August 13, 2019

Disclaimer

Certain statements in this document may be forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties like governmen^t actions, local political or economic developments, technological risks, and many other factors that could cause actual results to differmaterially from those contemplated by the relevant forward looking statements. Ester Industries Limitedwill not be in any way responsible for any action taken based on such statements and undertakes noobligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

Revenue from operations up 25%; EBITDA jumps 2x to Rs. 54 cr; PAT grows ~3.25x to Rs. 24 cr

• Outstanding interest bearing external term debt of Rs. 73 cr as on 30t^h June 2019 including Rs. 3 cr disbursed out of a fresh sanctioned TL of Rs. 16 cr. Balance Rs. 13 cr will be disbursed by 31st March 2020
• Repayment Schedule (including fresh term loan of Rs 16 cr)
• FY20 Rs. 16 cr (from July 2019 to March 2020)
• FY21 Rs. 23 cr
• FY22 Rs. 21 cr
• FY23 Rs. 21 cr
• FY24 Rs. 4 cr FY 25 Rs. 1 cr
• Repayment obligation during FY 2018-19 was Rs. 44 cr.
• Repayment obligation will reduce significantly to less than Rs. 23 cr per annum from FY 2019-20 onwards
• Interest bearing working capital liabilities stood at Rs. 129 cr as at 30t^h June 2019 as compared to Rs. 166 crores as at 31st March 2019
• Interest bearing debt as multiple of annualized EBITDA at healthy level of 0.95 as at 30th June 2019 as compared to 2.13 as at 31st March 2019

• Total Outside Liabilities (TOL) : Tangible Net Worth (TNW) ratio stood at 0.93 as at 30th June 2019 as compared to 1.05 as at 31st March 2019. TOL : TNW ratio to remain at prudent levels going forward

• Specialty Polymer and Film business performs well – delivering majority of the revenue and profitability growth

• Expect momentum in Specialty business to continue on the back of visible demand

					F ig in s cr
	R e e n e s v u			E B I T
	Q 1 F Y 2 0	Q 1 F Y 1 9	%	Q 1 F Y 2 0	Q 1 F Y 1 9	%
Po ly te es r i lm * F	2 2 6. 2 9	6. 9 1 7 7	2 8	4 9. 6 9	2 6. 4 5	8 8
Sp ia l ty ec Po ly m er s	5. 6 5 1	7. 7 9	1 0 1	6. 0 0	1. 0 5	4 7 2
in in En g ee r g P la ics t s	4 2. 1 4	6 4 2. 1	( ) 0. 1	8 1. 1	2. 7 1	( ) 5 6. 3

*Q1 FY 20 - includes revenue of Rs 25.51cr and EBIT of Rs 0.85 cr from Polyester Chips *Q1 FY 19 - includes revenue of Rs 15.65 cr and EBIT of Rs 0.49 cr from Polyester Chips

Polyester Films – Revenue growth of 28% was driven by volumes and realisation improvement. Additional industry capacities coming on-stream expected to put some pressure on margins. Efforts towards improving the product mix by increasing the share of high margin products to help maintain realisations.

Specialty Polymers – Strong performance highlighted by revenue and profitability growth of 101% & 472% respectively. Higher off-take of MB03 product drove bulk of the growth. Witnessing steady demand for remaining products as well. Expect business momentum to continue during the year.

Engineering Plastics – Sustained revenue though margins under pressure amid challenging business environment

Commenting on the results, Mr. Arvind Singhania, Chairman, Ester Industries said

"We have started the year on ^a positive note with healthy revenue growth of 25% over corresponding quarter last year and improvement in PAT by 2.25 fold on the back of strong performance from our Specialty Polymer and Film businesses.

This year has proved to be ^a turnaround year for Specialty Polymer business. While the pick up in stain resistance master batch MB-03 has been good, we are witnessing further traction and expec^t volume to further grow in the following years. Besides MB – 03, we are witnessing encouraging & positive response for some of the other key products. We expec^t higher product off-take in coming years and remain buoyant about this business going forward.

Q1 FY20 has been an exceptionally good quarter for Film business. In the medium to long term, we expec^t the prospec^t of the business to be buoyant though there may be some volatility in the short term due to start up of 2 Film production lines during this fiscal. Our focus continues to be on enhancing our product mix and increasing the share of value added products which would help us be more resilient to these cycles.

Engineering Plastics business continue to operate under challenging conditions – tepid demand especially due to pressure on demand in Auto & Electric sectors. Performance of EP business remains in the black albeit with lower margins. We are working towards shifting the product mix – focusing more on value added products and containing costs which should help in preserving margins and profitability.

In addition to the above, our cost rationalization measures should also help us in delivering higher profitability. We have started ^a project for Automation of Business Processes with the core objective of using technology & process optimisation to enhance visibility, control and efficiency for improved decision making besides implementation of work flow based approval system across processes. After full implementation, it would enable better & well informed business decisions making, improved efficiency and cost reduction by Rs. 4 – 6 crores per annum."

High entry barriers - Patent protected business (Product & 7

Patentsfiled

19

Product portfolio

9

30,000MTPA 20%+

Production Capacity Margins on achieving of adequate scale of operations

• Product portfolio -19 products at various stages of development of which patents have been filed in respect of 7
• High entry barriers protected by Intellectual Property rights
• Existing Product Portfolio –
• •Product Stain resistant Master Batch – Positive response from customers; ramping up sales
• • Master batch for a Cationic Dyeable Yarn and Deep Dyeable Yarn- Patent application filed in US, European Union, Korea, Thailand and China for a Master Batch to produce specialized polyester yarn. Gaining strong potential in China and Taiwan
• Sales of MB – 03 expected to be in the range of 1200 MT to 1400 MT during FY 2019-20 and 1600 MT to 2200 MT during FY 2020-21 in comparison to 437 MT during FY 2018-19

10

Partners with a Global Chemical Leader in Manufacturing innovative Polybutylene Terephthalate (PBT)

• Signed 'Manufacture and Supply Agreement' with a global chemical leader in April 2019 effective 1st April 2019
• Agreement is renewable by mutual consent after two years
• While agreement is for nominal quantity, there is possibility of substantial upside
• Innovative PBT find application across varied Industries and products automotive to consumer products, and from electronics to fibers.

Cationic Dyeable Master Batch (MB-06)

• Approaching final stages of product development phase
• Expect good demand in years to come

Deep Dyeable Master Batch (MB-07)

• Cleared qualification steps at various customers in USA, EU, China and Korea
• Commercial sales have begun albeit with very small volumes
• Expect volumes to pick up in coming years

Product Code Product Description Status of Patent Product approval from customer Application ESTER HR-03 Hot Fill PET by normal ISBM Granted in USA and filed in India, Europe Approved Packaging ESPET MB-03 Masterbatch Sulfonated PET Granted in USA and filed in India, Europe, Korea Approved Stain Resistance in Nylon Carpet ESPBN Clear PBN Granted in USA & EU and filed in IndiaUnder Trials Monolayer and Multilayer ContainersESPET HR-01 B3 Beer Keg PET Granted in USA and filed in India & EUUnder Trials Monolayer containers/Kegs ESPET MW‐01 Microwaveble PET Filed in India Under Trials Extrusion and thermoforming ESPET FR-10 Flame Retardent PET Filed in India Approved Flame retardant master batch for PET Polyester in textile (PFY/PSF) & Film application ESPET MB-06 R4 & ESPET MB-07 R8Easy Dyeable & Cationic Masterbatch Filed in India, USA, European Union, China, Korea & Thailand MB-06 R3 - Under Trial MB-07 R7 - Approved Deep and Dark dyeablity in Textile

12

Polyethylene Terephthalate (PET)

Polybutylene Terephthalate (PBT)

Polyethylene Naphthalate (PEN)

Master Batches

/ d ka fi l l Rig i Pa ing Ho Be Ke t- c g er gs –
le lam da dy b le Te xti F Re De ta nt, e r ep ea – ba he Ca dy b le ba h tio nic ste tc ste tc ma r s, ea ma r
M Ca Sta in Re sis Ba he ets ta nt te tc rp as r s –
He Se la b le at a
/ En d P las Inj Mo l din ine tic tio g er e s ec n u g
M lt lym fo les Lo Po Te xti w e er s r

Applications

De-commoditizing the business by changing product mix

Mfg. Capacity -57,000MTPA Polyester Films & 13,200 MTPA Metalized polyester films

Improving sector fundamentals – Better pricing environment;

No. of countries (exports)

#56 ~30%

Share of value added product in next two years from ~20% (FY19)

Cost reduction initiatives and improving production & process efficiencies likely to contribute to bottom line

•	St dy fo h h l hte d by 2 8 % h d ~2 h ig ig in wt wt ea p er rm an ce g ro re ve nu e an x g ro
	fo he Qt ( ) in E B I T Y- Y r t r. o-
•	W h le lum & l d du he l ke ly i isa ion ine ing i t str t rte vo es re a s r em a on g r q ua r,
	d d l s ly fte he it ion ice ing r t rte a a up p ma y so n p r s o ve co m q ua rs
•	f fo ds du by he ha f h h m E im ing ix inc ing ig in rts to ct t wa r p ro p ro m re as s re o ar g v
	du he lp l d int in isa ion ct to t tr p ro ma a re a en –

16

• •Manufactures and markets polyester films under the brand "UmaPET"
• •Manufacturing capacity - 57,000 MTPA for polyester films & 13,200 MTPA for metalized polyester films
• •Integrated player – Polyethylene Terephthalate (Polyester) chips manufacturing capacity 67,000 MTPA
• •Global Footprint : Formidable reach across more than 56+ countries
• •Value Added & Specialty products include transparent barrier film, shrink film & silky matte etc.
• • Thrust on increasing proportion of value added & specialty products in overall mix by focusing on innovation, development and partnership with customers both in India and overseas which will reduce the effect of inherent cyclicality

Industry Dynamics

• •Market size of Domestic BOPET films ~440000 - ~450000 tpa
• •Domestic demand growing at 10%-12%
• • Expect market to absorb with some disruption the incremental supply (70,000 tpa) expected to hit the market during the year

Company specific initiatives

• •Working towards increasing the share of value added products – ~30% within next 2 years
• • On the back of improved performance in FY 2018-19 coupled with reduced term debt & repayment obligation, Company to evaluate growth through expansion by end of FY 2020

s t c u d o r P	W hit O e pa qu e	h C lea Hi g r		lex b le ka F i Pa ing c g
	Hi h Ba rri g er	Em bo b le ssa	s n o	Ba rri Pa ka ing er c g
	He Sa lea b le at	Em bo ssi ng
	S fi hri k lm n	An Sta ti tic -	p p A	Li d din g
	Me liz d Hi h Ba rri ta e g er	M at te		La be l & G hic ra p s

Product Portfolio

13,500MTPA

Mfg. capacity

"Estoplast"

Products marketed under the brand

"Fastest Growing Enterprise Processing (Engineering Polymers)" at the Plastindia Exhibition in February 2015

Improving product / customer mix, expanding exports & controlling costs to improve margin profile & return ratio

• A well regarded manufacturer of Engineering plastics
• Diverse Product Portfolio – 250+ grades products marketed under the brand "ESTOPLAST"
• Manufacturing capacity - 13,500 MTPA
• Achieved CAGR of 5% and 6% in volume & value terms respectively over last 5 years
• Awarded the prestigious Plasticon Gold Award for the "Fastest Growing Enterprise – Processing (Engineering Polymers)" at the Business highlights Plastindia Exhibition in February 2015

Po	ly bu ty	len e	Te re p	ht ha lat	( e	P B T )

Polyethylene Terephthalate (PET)

Polyamide 6 (Nylon 6)

Polyamide 66 (Nylon 66)

Polycarbonate (PC)

Acrylonitrile Butadiene Styrene (ABS)

Polyoxymethylene (POM)

Alloys & Blends

	Sw itc hg In du str ea r y
	M C B, M C C B, R C C B, Ca Co & he Pa etc ot rts se ve r r ,
	ig ht ing du L In str y
	/ Sw he So ke C l de itc L E D F L Ho ts, et s, c rs, c.
	Ap l ia In du str nc p es y
s n	Kn bs Ro Sw he Co ler Bo dy Pa itc ta rts tc. o ry s, up s, , e ,
o ti	Te i le In du xt str y
a c li p p	b bin Ap Ga Su be Bo cti Tu etc s, ro n ug e, on s,
	Au ive In du Pa Ve h ic les to t str mo ss en ge r y -
A	W M Ex l - Do Ha d les Be ls, he l Co irr te ts, tc. rna or n ze e ve r, or p ar e ,
	l - Ce A C C lip li ke Co Int Fa sci H V Pa En ine Pa nte rts rts to er na r a, s, g nn ec rs ,
	Au ive In du 2 W he ler to t str mo y - e s
	Ha d le Ba G b Ha d les Co Be ls, Ign Co ls, itio i ts, etc n r p ar ra n ve rs, ze n ,
	Sa fet De ice y v s
	lm ds He Pa To et rts tc. e- gu ar , e ,

Investor Contacts

For more information contact:

Pradeep Kumar Rustagi (Chief Financial Officer) Ester Industries Ltd.Tel: +91 124 2656 100Fax: +91 124 2656 199E-mail: pradeep.rustagi@ester.in

Gavin Desa / Suraj Digawalekar CDR India Tel: +91 22 6645 1237 / 1219 Fax: +91 22 6645 1213E-mail: gavin@cdr-india.com suraj@cdr-india.com

About Us: (CIN :- L24111UR1985PLC015063)

Incorporated in 1985, Ester Industries Limited (EIL) is an ISO 9001:2008,ISO 22000:2005,TS16949:2002 certified Company engaged in the manufacture of polyester films, specialty polymers, engineering plastics and polyester chips with manufacturing facilities located in Khatima (Uttarakhand). A globally recognized player Ester manufactures and markets its polyester films under the brand 'UmaPET' and engineering plastics as 'Estoplast'. The Specialty Polymers business is driven by technology and innovation and the Company presently has many patent applications pending for this business. With state-of-the-art manufacturing plant, skillfully managed operations and ^a committed work force Ester continuously strives to meet commitments towards total customer satisfaction.