Cost Reduction & Operational Efficiencies: Kuantum Papers has taken up CAPEX INR 440 Cr. Projects

Cost Reduction & Operational Efficiencies: Kuantum Papers has taken up CAPEX INR 440 Cr. Projects

Saila Khurd | 23 July 2020 | The Pulp and Paper Times:

Towards the fag end of the FY 19-20, the performance of Kuantum Papers did get impacted due to COVID-19 pandemic outbreak, resulting in a Nationwide lockdown and curfew imposed in the various parts of the country during March 2020 to prevent novel coronavirus (COVID-19) from spreading in the country. 

This clearly affected its chance to get past the quantitative figures of the previous year. Kuantum Papers reported net profit of INR 71 Cr. in FY 19-20 and is on the spree of continuing the work upon mill’s operational efficiency.  

"The initiatives taken by your company in the recent years in improving productivity and operational efficiencies have led to achieving better operational performance. The company has continued to take up projects in focused areas for operational improvement and this has also led to improved operational efficiencies, productivity, reduction in operational costs, and sizeable increase in savings," stated Mr. Jagesh Kumar Khaitan, Chairman of Kuantum Papers Limited in its annual reports of FY 19-20. 

"The results of cost reduction initiatives and operational efficiencies will continue to be even more visible in the current financial year 2020-21 as your company has continued these initiatives to optimize capacity utilization, cost reduction, new products, optimizing production of better margin products by further undertaking modification and up-gradation of the pulp mill, the chemical recovery plant and a captive 20 MW power plant at a large outlay of Rs 440 crores for improving the cost-effectivity, process efficiency, product quality and betterment in operations,

"These initiatives have made Kuantum Papers not only one of the most cost-competitive paper mills but is also placed amongst the large paper player in the writing and printing segment. Furthermore, continuous research & development have enabled the company to manufacture papers of distinctive prime quality and broader product mix, which is competing with the premium quality of other large paper mills," Mr. Khaitan says in the report.

PROJECTS AND TERM LOANS:

Kuantum Papers has taken up implementation of Capex projects for modification, up-gradation of paper machines and other equipment and cost reduction initiatives at a project cost of Rs. 192.00 crores (later on revised to Rs. 200.57 crores) and is funded by Term Loans of Rs. 144.00 crores and internal accruals of Rs. 48.00 crores (revised to Rs. 56.57 crores). These projects have been commissioned during the year under review.

Further taking up the implementation for expansion and enhancement of the production capacity to 148500 TPA, expanding its agro pulp and hard wood pulp streets, setting up an additional chemical recovery plant and a captive power plant, thereby sustaining competitiveness in capacity and quality enhancement, cost reduction and improving margins and profitability of the Company. The project cost was envisaged at Rs. 444.04 crores, which was proposed to be financed by debt of Rs. 350.00 crores (now revised to Rs. 333.00 crores) and internal accruals of Rs. 94.04 crores (now revised to Rs. 111.04 crores). 

The capex projects were envisaged to be completed and commissioned in June 2020 but due to Covid-19 pandemic outbreak, nationwide lockdown and curfew in various states including Punjab from March 2020 to May 2020, a delay in the commissioning of the capex projects is anticipated. The work at site has resumed after relaxations in the lockdown. As per the current assessment, with the timely equipment supplies, availability of adequate workforce as also timely payment of vendors and contractors, the capex projects are now scheduled for commissioning by September 2020.

Sales and Profit:

The company recorded a net sales turnover (net of GST) and including other income, at Rs. 75,350.53 lacs; operating profit at Rs. 12,732.74 lacs; Profit before Tax at Rs. 6,519.19 lacs. Net profit after tax and other comprehensive income (expense) is Rs. 7,167.61 lacs. The profit after tax for the year under review is higher due to the lower income tax culminating from the reduced tax rates announced by the Govt.

OPERATIONS:

During the year under review, your Company has achieved a production of 1,26,633 metric tonnes, as against 1,27,756 metric tonnes in the previous year. The quantitative figure for the sale of paper was 1,25,267 metric tonnes this year, leaving 1,730 metric tonnes as closing stock, as against the sale of 1,27,390 metric tonnes in the previous year.

From the 2nd quarter onwards, there had been a slowdown in the economy, though considered temporary at time but the economy did not recover and the markets were challenged by consumption and demand and fairly high effect of a liquidity crunch. The sales realization has been impacted by about 10% after the first quarter over the previous year. There has also been increase in the material and input costs. Despite this, improved operational efficiencies, better productivity and product quality, higher volumes of premium quality paper products like copier and surface sized paper, and enriched product mix coupled with better operating parameters have contributed to better sales as well as profitability.

"Raw material costs account for around 47 per cent of the operating income of mills in the paper industry. Agro and Wood-based pulp are the main raw materials required for manufacturing W & P paper, especially in the higher end papers such as maplitho and coated paper. India's wood resources are limited; therefore, cost of wood is much higher in global comparison. Since there is conspicuous absence of Government's policies favouring industrial/production plantation, securing future wood supplies will be the Industry's biggest challenge. In line with this increase in production, demand for raw materials will also go up. The different raw materials used to produce paper are - agri-residues, wood and bamboo pulp, as well as imported pulp, where your company has a distinct advantage," Report stated.

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