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NRAIL reports INR 116 Cr. net profit in FY 19-20; invested INR 50.54 Cr in infrastructure and process modernisation

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Annual report summary of N R Agarwal Industries Limited for FY 19-20

                     

NRAIL reports INR 116 Cr. net profit in FY 19-20; invested INR 50.54 Cr in infrastructure and process modernisation

Defers its proposed duplex board capacity expansion

Mumbai | 11th January 2021 | The Pulp and Paper Times:

One of the leading manufacturers of quality producers of the Paper & Packaging Board in India, N R Agarwal Industries (NRAIL) is pleased to record revenues and profit after tax in FY 19-20, which surpassed the best it had achieved in the previous financial year. During the year under review, NRAIL reported profitable growth as revenues increased 6.58% while EBIDTA increased 18.50% and profit after tax strengthened 23.36%.

“NRAIL’s record performance of FY 19-20 was not the result of a short-term spike in paper realisations that generated a one-time windfall, but was the result of a number of initiatives that enhanced profitability,”

“The modernisation programme increased machine efficiency with increased speed and full utilisation of assets, which helped the Company report higher sales on the one hand and amortise fixed costs effectively on the other. The increased deinking efficiency enhanced pulp yield that reduced resource cost. The Company’s investment in a reverse osmosis plant enhanced the recycling of process water that, in turn, reduced the quantity of waste water discharge,” said Mr. R N Agarwal, Chairman & Managing Director of NRAIL in the annual report for FY 19-20

During the previous financial year, NRAIL had invested INR 50.54 Cr in infrastructure and process modernisation with the objective to strengthen efficiency. The sum of these initiatives paid off during the year under review, generating a range of attractive upsides.

A visible impact of the modernisation was a superior paper quality, which strengthened average sales realisations.

Mr. Agarwal further said that it would be simplistic to assume that the improvement in our performance was achieved only through investment in the latest technology. It was achieved through an overarching culture of pushing the frontier, empowering workers and questioning convention. This was reflected in proactive periodic shutdowns of manufacturing assets for maintenance when this is not the usual industry practice; the senior management deepened the practice of cross-functional engagement that empowered shop-floor workers to explore cost reduction and operational improvements.

“We believe that our Balance Sheet will continue to right-size considering that our modernisation investments were made in projects with a three-year payback, returns from most already having commenced. We believe that even as market conditions remain sluggish, the Company expects to remain among the last persons standing and among the better placed to make an advance as soon as conditions revive,”

“In an environment when the consumer sentiment appears uncertain, the Company has selected to defer its proposed duplex board capacity expansion. A decision on this expansion will be taken when market conditions improve and when there is better revenue visibility,” he said.

The Pandemic Impact:

The performance of the company was affected from the second half of March 2020 when the first signs of the Covid-19 pandemic began to become evident across India. The packaging board, which is almost 50% of our total production, has good potential as it is used to package the essentials like pharmaceutical, food, cereals etc. However, the other grades like writing and printing and copier may witness downward or no growth in demand with work from home practices, online education systems and other digital platforms taking a lead due to the pandemic. However, we are confident about our ability to manage this crisis through our financial stability, our dealers and consumers, our committed employees and our quality of leadership.

As schools began to shut, the offtake of writing & printing paper declined. This affected the offtake of the Company’s writing & printing paper products and, in turn, our manufacturing operations where capacity utilisation declined to around 46% in the first quarter of the current year.

However, the off take of the Company’s packaging board business remained largely unaffected. Since this business serviced the growing needs of the FMCG and pharmaceutical sectors, whose sales sustained through the lockdown, the impact on this segment was moderate. The manufacturing operations of the Company’s packaging board remained shut for a period of 30 days.

STATE OF COMPANY’S AFFAIRS

N R Agarwal Industries Limited is pleased to present record revenues and profit after tax in 2019-20, which surpassed the best it had achieved in the previous financial year. During the year under review, the company reported profitable growth as revenues increased 6.58 per cent while EBIDTA increased 18.50 per cent and profit after tax strengthened 23.36 per cent. The improvement in performance was also accompanied by an improvement in business health. The company reported an increase in EBIDTA margin from 14.62% in 2018-19 to 16.25% in 2019-20.

During the year under review, the combined production from Packaging Board, Writing & Printing paper and Copier stood at 338988 MT and the capacity utilization stood at an average of 93%. The Company is continuously focusing on improving operating efficiencies and reducing costs with for better financial performance. The Company continues to enjoy the dominant position of being a world class quality manufacturer of Duplex Board in India.

Communicate to stakeholders, Mr. Agarwal says that there will be a decline in our revenues and profits during the current year. However, N R Agarwal will continue to remain profitable on account of a broad-based business model. The Company will protect the integrity of its Balance Sheet and its competitiveness till the time.

                     

The Report also give an overview of the paper industry and says, the Indian paper and paper products market is projected to grow from US$ 8.6 billion in 2018 to US$ 13.4 billion by 2024, growing at a CAGR of 7.8% during 2019-24. Growth of the manufacturing sector, increased requirement for better quality packaging of FMCG products and the demand for the upstream market of paper products, such as tissue paper, filter paper, light-weight online coated paper and medical grade coated paper, are expected to be catalysts of the growth of the Indian paper and paper products market over the foreseeable future. 

The value of the Indian packaging industry was pegged at US$50.5 billion in 2019 and is projected to reach a value of US$204.81 billion by 2025, growing at a CAGR of 26.7% between 2020-25. The rapid growth of the industry is driven by the growth of the pharmaceuticals and the foods and beverages industry. Besides this, the rise of the middle class, growth of organised retail and exports, coupled with India’s booming e-commerce sector, have been the major catalysts of growth for India’s packaging industry. The total packaging consumption in India has increased ~200% over the past decade, rising from 4.3 kg per person per annum to 8.6 kg per annum.


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