The excess capacity from new film plants, mostly in Asia, will not last forever, said Polyplex (Thailand) Public Co. Ltd.'s chairman in the firm's annual report.
As anticipated, the polyester film industry retracted from historical highs of the previous year, with margins returning to normal levels, Chairman Manu Leopairote said in the company's 2011-12 report.
Leopairote said Polyplex would remain upbeat about the plastic film industry. The company believes that steps taken to diversify risks associated with the cyclical nature of the polyester industry would contribute to maintaining the growth tempo as well as a reasonable bottom line, he said in the report.
Backed by a strong and liquid balance sheet, Polyplex would continue to grow the business.
The new thin polyester film line in the United States was the continuation of the company's policy to have a geographically diversified manufacturing base, he said.
He said Polyplex was fully committed to the expansion projects announced in the last 18 months, despite the sharp downturn in margins and a challenging outlook for the current year. Polyplex has committed more than US$200 million to these projects, which will double the asset base in next 12 months.
All the projects were progressing satisfactorily and expected to begin commercial operations on time, he added.
Notwithstanding the comparison to the previous year's profitability, the Polyplex numbers for the fiscal year were respectable.
After-tax profit fell 65 percent to 1.36 billion baht (US$42.9 million) but the company still had a reasonable net margin of 13.3 percent on sales.
Sales were down 9.3 percent on the year at 10.1 billion baht (US$320 million), reflecting the compression in selling prices despite higher volumes.