West Coast Paper earned INR 276 Cr net profit in FY19-20; Impact of COVID to decline demand by 10-15 percent

West Coast Paper earned INR 276 Cr net profit in FY19-20; Impact of COVID to decline demand by 10-15 percent 

Dandeli | 14 January 2021 | The Pulp and Paper Times:

The Paper Industry is cyclical in nature and its performance depends on the global pulp and paper demand supply situation. The domestic paper sector is likely to see marginal improvement in demand from education and corporate sectors, aided by expected higher GDP growth of the Country over a medium to long term period. However the impact of COVID-19 will be felt in the overall working for the year 2020-21.

“COVID-19 has severally disrupted the demand for paper and paper board across all segments since Q4 of 2019-20 and is expected to continue through H1 of 2020-21. For the year as a whole, the demand is expected to contract by 10-15% compared to last year,” Said Mr. S.K Bangur, Chairman and Managing Director of West Coast Paper Mills (WCPM) in the company’s annual report for FY 19-20.

WCPM is continuously working by phase wise investment at Paper Division, Dandeli for improving paper quality, produce new speciality products and reduction of usage of steam, power, chemical, water and also minimize the breakdown of machines.

Mr. Bangur further stated that import pressures are likely to be continued although US $ has appreciated against INR by more than 5% and could result in pricing pressures on paper products particularly maplitho segment. However, WCPM has a well diversified product base, which partially insulates it from the imports and cyclicity. WCPM has developed new product variants like Walk up, Straw Base Straw Fold, Aqua base, Wax cote, Wesco Firma to improvise its product mix and capture new markets.

Further, recent launch of Plastic free coated cup stock paper will open new avenues for the WCPM with tremendous opportunities in the wake of single use plastic ban drive of the Central Government as well as ban by various State Governments. This segment having double digit growth prospect augurs well for increasing the market share in this segment.

WCPM has been investing heavily into modernizing equipment, improving quality, and developing personnel to maintain its position as a global leader. “The Company has fully integrated paper and pulp facility, right from processing pulp from the woods to using captive power source. This helps the Company manage the cost effectively. The size and scale of the operations gives us an edge in sourcing Raw Materials as well as in transporting finished goods at best possible rates. The scale benefits and improved productivity and efficiency that we have brought in the Company over the last few years has helped us to improve profitability. Also, this year your company significantly brought down its raw material cost by reducing the imports of costlier wooden chips from 43 percent to 17 percent,” Mr. Bangur informed in the report.

With optimum capacity utilization, good demand outlook and progressive shift into environmental friendly and value added products; WCPM is expected to sustain its growth prospects.

WCPM’s Paper Division produces well established brands of commercial and premium grades of paper and boards ranging from 54 to 600 GSM, catered across six different product segments namely writing, printing, business stationary, specialty, industrial and packaging. The Company is constantly focusing on development of products and customer satisfaction.

PERFORMANCE:

The performance of the Company during the year under review has been satisfactory. The production & working during this year got impacted due to planned shut of ENMAS Recovery Boiler for 19 days in Oct. Finance Cost was higher due to NCDs /Loan taken for APL acquisition. Due to COVID 19 in March 2020, production of 5924 MT and Sales of 10136 MT got impacted.

Due to COVID 19 full plant was stopped from 26.03.2020. Based on Govt. approval for continuous process plant, plant was restarted on 04.04.2020. Since then plant is running at partial capacity due to low demand. It is expected to improve in Q2 FY 21.

DIVISION WISE PERFORMANCE:

PAPER AND PAPERBOARD DIVISION, DANDELI

The production of Paper and Paperboard was 313876 MT (98% capacity utilization) during the year against 304957 MT in the last year (95% capacity utilization) i.e., higher by 8919 MT. The sale of Paper and Paperboard was 304762 MT during the year against 301931 MT in the last year i.e., higher by 2831 MT. Turnover during the year was INR 1866 Crores as against INR 1851 Crores in the last year, i.e., higher by INR 15 Crores. The EBITDA margin was 24.56% during the year.

Resources Performance: 

Raw material: The wood consumed per ton of pulp increased from 4.17 T/T in FY 2018-19 to 4.29 T/T in FY 2019-20 due to replacement of use of high yield imported chips with indigenous wood to encourage local farmers.

Energy: Total energy consumed per ton of product has reduced from 1286 Kwh/MT in FY 2018-19 to 1277 Kwh/MT in FY 2019-20.

Water: Water consumption per ton of product has reduced from 64 M3/MT in FY 2018-19 to 63 M3/MT in 2019-20.

Impact on Paper Industry post COVID-19

Noble Corona virus outbreaks have developed across the globe and is causing widespread concerns and hardship for consumers and business alike. With number of COVID-19 rising, the Anxiety levels are also on the rise. The manufacturing sector has been facing quite a few challenges like lower demand and uncertain outlook, the paper manufacturers are a no exceptions to this.

Potential negative demand impacts

i) Slowdown in Fast-Moving Consumer Goods - Concerns over the virus will, likely, affect consumer spending patterns, which will cascade across the entire economy. From a pulp and paper perspective, such a trend will most directly impact packaging demand across sectors except for e-commerce.

ii) Reduced Pulp Export leading to Domestic Oversupply- With reduced packaging demands, comes reduced demand for pulp to make those products. China is the key buyer of pulp, paper, wood, and chips. China accounted for one-third of the world’s market pulp imports last decade. If China stops importing as much product, countries reliant on exporting goods to China will have to look to domestic markets to mitigate oversupply issues. This is likely to impact the US exporters of Pulp and Paper products as it has been one of the largest exporters to China over the last decade.

Potential positive demand impacts

i) Towel and Tissue Consumption Could Increase - Health officials worldwide have stressed the importance of hygiene and disinfecting as efforts to contain COIVD-19 intensify. Arguably the simplest measure to avoid spreading the disease – washing your hands – could have the biggest impact for pulp and paper demand with the usage of disposable hand towels increasing multifold.

ii) Increased e-commerce - The public need much more than disinfectant to make it through a potential pandemic, and much of what it needs will be bought online and delivered to homes. And while some governments have mandated people stay in their homes, many will voluntarily shelter themselves and rely on delivery services for food and goods. This creates a need for packaging, which could drive an increase in demand for packaging paper and corrugated materials.

Web Title: West Coast Paper earned INR 276 Cr net profit in FY19 20 Impact of COVID to decline demand by 10 15 percent