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Seshasayee Paper to step in Multi-layer Boards and Virgin Kraft Paper manufacturing; reports Profit Before Tax (PBT) INR 86 Cr in FY 20-21

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Seshasayee Paper to take new steps to change its product Mix

Seshasayee Paper to step in Multi-layer Boards and Virgin Kraft Paper manufacturing; reports Profit Before Tax (PBT) INR 86 Cr in FY 20-21

The paper mill has tightened its belt to minimize the impact of Covid on profitability by introducing more new products in the markets. The company will facilitate ‘çup-stock’ and ‘carton board’ manufacture on PM-2


Erode | 5th July 2021 | The Pulp and Paper Times: 

Indian Paper Industry went through one of its toughest phases in its history with Covid-19 affecting demand and disrupting the supply chain. Paper manufacturers encountered serious challenges in operating their units due to lack of orders, suffered huge reduction in capacity utilisation, eroding, substantially the profitability of their units.

“This was more pronounced in the case of manufacturers of printing and writing grades whose offtake fell sharply due to closure of schools, colleges and courts as well as from work-from home practices. In addition, galloping oil prices, disruption in availability of containers for export besides huge rise in shipping costs had crippled the industry,” said Mr. N Gopalaratnam, Chairman of Seshasayee Paper and Boards Ltd. (SPBL) in the annual report for FY 20-21.

Mr. Gopalaratnam further described the situation, the severity and longevity of the surge in second wave of Covid-19 is unknown at this point of time and hence it is hard to guess the recovery time. Paper Industry’s growth, generally, mirrors the growth in the economy and hence an early economic recovery is a pre-requisite for paper industry’s revival of fortunes.

While Outlining SPBL’s future course of action towards minimizing the COVID impact on the profitability, Mr. Gopalaratnam said, SPBL, on its part has been taking steps to expand its product portfolio to reduce its dependence on manufacture of printing and writing grades. 

As a part of the ongoing MDP III, Paper Machine 2 has been modified to include manufacture of multi-layer boards. This will facilitate ‘çup-stock’ and ‘carton board’ manufacture. SPBL has also developed in-house pulp based virgin kraft packaging papers for the food industry. These papers will be able to secure FSSAI. Hopefully, the Covid-19 impact may not last beyond Q2 which will help the industry to put together a quick recovery act.

OPERATIONS in FY 20-21

The lockdown imposed in multiple phases to contain the spread of COVID-19 pandemic, had affected the normal functioning of commercial establishments, schools, colleges and educational institutions. Slowdown in the Indian economy, coupled with poor offtake in export markets due to the pandemic situation, had resulted in significant reduction in demand for Printing and Writing Paper, key segment in which the Company operates. Due to these factors, Company witnessed significant drop in Revenue and profits during the financial year ended March 31, 2021.

MILL DEVELOPMENT PLAN 

In the FY 2020-21, the Company had embarked on a Mill Development Plan - III (MDP - III) at Unit : Erode at a Cost of INR 315 crores. 
The MDP - III at Unit : Erode consists of : 
- Upgradation and Modernisation of the Paper Machines to increase the Capacity from 1 32 000 tonnes per annum to 1 65 000 tonnes per annum. 
-Upgradation and Modernisation of the RDH Pulp Mill to increase the Capacity to 1,54,000 tonnes per annum. 
-Conversion of one Paper Machine to manufacture high-end varieties of multi-layer boards. 
- Upgradation of the Recovery Island and augmentation of Waste Water Treatment Plant. 
The execution of the Project (MDP-III) had commenced with July 01, 2019 as the Zero Date, with an originally planned project execution period of 21 months. However, with some of the major suppliers and service providers, both globally and in India, located in Covid-19-lockdown areas, the project has seen delays and the Company expects to complete the Project in entirety, in FY 2021-22.

PRODUCTION 

During the FY 2020-21, the production at Unit : Erode was 1,12,489 tonnes of paper, as compared to 1,25,313 tonnes, produced in the previous year. The production during the year includes 16,226 tonnes of Pulp Board produced during the year (Previous Year - Nil). Accordingly paper production at Unit : Erode was lower by 29,050 tonnes, compared to the previous year. Reduction was mainly due to (i) the poor market-related lockdowns and the consequent market related intermittent shuts that the Company had to avail in its Paper Machines and (ii) the shuts availed by the Company for upgradation works in its Paper Machines during the year, under Mill Development Plan - III. 

Unit : Erode also produced 32,569 tonnes of Wet Lap Pulp (Previous Year 35,083 tonnes) to augment the Pulp requirements of Unit : Tirunelveli. 

                     
Unit: Tirunelveli produced 57,649 tonnes of Paper during the FY 2020-21, as compared to 72,234 tonnes, produced in the previous year. The production was lower by 14,585 tonnes, compared to the previous year. Reduction was mainly due to the poor market conditions and the consequent market-related intermittent shuts. 

Overall Production for the Company was 1,70,318 tonnes of Paper and Boards for the year, as compared to 1,97,547 tonnes produced, in the previous year.

PROFITABILITY 

The Revenue from Operations of the Company for the year was INR 781.79 crores, as against INR 1183.98 crores, in the previous year. 
Profit before interest, depreciation, exceptional item and tax was INR 126.87 crores, for the Company as a whole, compared to INR 289.57 crores, in the previous year. 
After absorbing interest and depreciation of INR 2.91 crores and INR 37.60 crores respectively, the Profit before tax (PBT) was INR 86.36 crores in FY 2020-21, as compared to INR 247.68 crores, in the previous year. 

The Company registered a lower PBT compared to previous year, mainly due to lower sales volumes and drop in net sales realisations in the current year, attributable in entirety to the significant reduction in demand for Printing and Writing Paper caused by lockdown imposed in multiple phases by Central / State Governments in India, to contain the spread of COVID-19 pandemic. 

EXPORT PERFORMANCE 

Unit : Erode exported 11,802 tonnes of paper during the year, as compared to 15,324 tonnes exported during FY 2019-20. The export proceeds in Foreign Currency for the year 2020-21 amounted to US $ 7,793,716 (Previous Year Exports - US $ 12,852,220 and AED 1,312,846). For Unit : Erode, in Rupee terms, the value of exports amounted to INR 55.38 crores (Previous Year INR 88.40 crores). For Unit : Erode, by volume, exports constituted around 14.38% of the Production as against the 12.23% in the previous year. 
Unit : Tirunelveli exported 16,181 tonnes of Paper during the year, as against 21,089 tonnes exported during 2019-20. The export proceeds in Foreign Currency amounted to US $ 11,200,798 (Previous Year Exports - US $ 16,673,504 and EURO 1,383,280). For Unit : Tirunelveli, in Rupee terms, the value of exports amounted to INR 75.32 crores (Previous Year INR 120.51 crores). For Unit: Tirunelveli, Exports, by volume, constituted around 28.06% of the Production as against 29.20% in the previous year

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