Farm-forestry strategy helped Andhra Paper in reducing the price of virgin fibre; Introduces new products in FY 20-21

Andhra Paper Limited (APL) is one of the largest manufacturers of uncoated free sheets and produces a range of Writing & Printing Papers along with other speciality papers like Cupstock, Virgin Kraft etc. for business & home consumers. Due to the pandemic, demand pattern has changed dramatically in FY 2020-21, wherein the demand for Writing & Printing Paper has dropped predominantly due to closure of educational institutions & corporates and at the same time demand for Packaging and Food Grade paper increased substantially. In order to meet the changed requirements of the customers Andhra Paper has come out with new & innovative products which helped the Company to cater to the needs of the customers as well as generate revenues by optimising the resources. 

 

“Despite the disruptions caused by the Covid-19 pandemic in the first quarter of the year under review, we have remained resilient and continued operations with great courage and determination. In the final quarter of FY 2021, we pushed hard to increase our standalone quarterly revenue to INR 36,666.41 lakh from INR 28,423.53 lakh in the year ago period,” said Mr. Shree Kumar Bangur, Chairman & Managing Director of Andhra Paper Limited in its annual report for FY 20-21.

 

Andhra Paper has changed the Product Mix by developing new products on war-footing to ensure that the machines are well covered during the changed demand environment. New products developed during the year like Pharma Print, Thermal Base Paper, Andhra SuperPrint, Cupstock variants, Virgin Kraft, Fresho Pack etc. are well accepted in market.

 

Mr. Bangur further says that, we continue to align our actions to our ‘Vision 2030’ sustainability goals, founded on 3 important aspects – Sustaining fibre source, investing in people and improving the planet. With our sights set on formidable goals and objectives, “I look forward with tremendous faith in APL to achieve our vision for business growth, sustainability and responsibility to encourage paper conservation”

 

APL has implemented a farm-forestry strategy that collaborates with private nurseries and research organisations, develops free saplings in partnership with farmers to sustain 100% consistent supply of Company’s fiber needs with a long-term vision to bring down haulage radius from present up to 300 KM to within 150 KM from mills in the state of Andhra Pradesh. Our Farm forestry program has led to the plantation of 52.1 lacs high yielding Casuarina clones, along with 271 lacs Casuarina seedlings within 150 KM radius of the mills.

 

This covered 4066 hectares of plantation and generated 20.3 lacs million man-days of employment for farmers. APL’s strategy to reduce distance of fibre procurement area has helped in reducing the price of virgin fibre during FY 2020-21.

 

The Annual report states, APL’s farm forestry program generate more wood on the earth than we consume; in fact, at more than double the rate of consumption. “Our investment towards responsible farm forest stewardship ensures a healthy and productive forest eco-system” Mr. Bangur said.

 

APL had partnered with 17 nurseries for production and distribution of clones. APL remains focused on developing virgin fibre within a radius of 150 KM from the mill by linking farmer community with partner nurseries for increasing plantation in the catchment area for sustainable supply of virgin fibre.

 

APL is putting its efforts in developing and blueprinting foray into the growing paperboard segment as new business development.

 

 

Though the demand picked up significantly, and production facilities operated at 100% capacity in fourth quarter of FY 2020-21, the full year sales volume were at 1,72,821 MTs, 20% lower vs previous year and production were at 1,61,493 MTs 30% lower vs. previous year. The demand contraction significantly impacted the revenue and operating capacity.

 

 

During FY 2020-21, revenue from operations was Rs. 886.75 Crores, a decrease of 30% compared to Rs. 1,269.70 Crores of previous year. The drop in revenue was on account of lower sales volume (15%) and lower price realisation (15%). The EBITDA was Rs. 69.52 Crores, decrease of 77.60% vs. Rs. 310.33 Crores of previous year. Net profit was at Rs. (4.60) Crores, decrease of 102% compared to Rs. 212.92 Crores in the previous year. The Company generated a free cash flow of Rs. 103.80 Crores. The total accumulated cash surplus is Rs. 320.63 Crores as at the FY 2020-21 and the same is invested in fixed deposits and mutual funds.

 

In India, W&P market is expected to grow by 2-3% until 2025. The growth is expected to come mainly from cut-size and books. Demand for UFS in India is dominated by the book segment and generally educational end-use such as text books using Creamwove paper. The cut-size paper market is still foreseen to continue on fast growth track, driving the overall performance of W&P sector. The growth is expected to be the highest in cut-size among the enduses 3-4% per annum up to 2025 in India, mainly driven by economic / business activity and office printing.

 

The report says, the midterm to long-term outlook for the industry is positive. We expect demand to recover and grow at a healthy five-year CAGR of 5.5-6.5% to 23-25 million MT by FY 2024-25. Demand will be led by healthy growth in paperboard volume, which is expected clock 7-9% CAGR over the next 5 years, and writing & printing which is expected to grow at 2-3% CAGR over the next 5 years.