SIPM: PM-6 to target building and decorative segment; to be commissioned in 2021

SIPM: PM-6 to target building and decorative segment; to be commissioned in 2021

Bengaluru | 10 November 2020 | The Pulp and Paper Times:

The Indian Paper industry which accounts for about 4% of global production, in recent times has registered faster growth rates of about 7%. The domestic demand is expected to grow at about 6 to 7% p.a., after FY 21 Paper industry plays an important role in the socio-economic development of the country. 

“Despite several infrastructural impediments, there is a strong growth in demand in several sub-segments of the Indian Paper Industry. There is perceptible shift in preference for higher quality products in both the Industrial and Cultural Segments and players with the right grade-quality mix are seeing opportunities for profitable growth,” anticipated by Mr. Manish Patel, Chairman & Managing Director of The South India Paper Mills Ltd. (SIPM) in its annual reports for FY 19-20.

SIPM is expanding its capacity in the existing paper mill premises which is situated at 150 km from Bangalore near Nanjangud in Karnataka state. The current capacity is about 200 MT/day.

Mr. Patel further gave information on the expansion plan of SIPM, “The Company’s plan for expansion of the production capacity of paper mill by installing PM6 (Paper Machine No.6) at an estimated cost of about INR 190 crores is under implementation. Production capacity is being increased from the present 200 MTPD (Metric Tonnes Per Day) to 460 MTPD. Civil works delayed due to Covid-19 pandemic and Capex on machineries is deferred by 4 months. Project is scheduled to be commissioned by March 2021. This investment in PM6 should further the good standing of SIPM’s products”

“With the technology selected for the new paper machine and associated pulping system, your Company is confident of successfully introducing new products into the building and docorative materials segment of the paper market. The advanced processing and paper making equipment will also enable a reduction in the cost of production of premium grades in the container board market by optimisation of furnish,” Mr. Manish informed in the report.

The report says that, these grades will meet international standards and enhance the market potential for the company by way of export opportunities and import substitution. The state of the art processing and finishing system also enables quick order changes to address the need for prompt delivery of multiple grades at short notice in the domestic market. The cost effective production of lighter and stronger grades of container-board will facilitate the delivery of high value to corrugated box end customers.

New ETP facility for conserving water and meeting the pollution control norms even on the proposed capacity expansion of the paper mill was installed in the preceding year. The treated effluent water is utilized for irrigation purposes in the nearby fields of third-party farmers with excellent crop yields.

OPERATIONS (FY 19-20)

SIPM’s revenue from operations for the financial year 2019-20 declined to INR 217.61 crores from INR 242.50 crores in the previous year. Revenue from 2nd quarter of the year were lower in line with reduction in raw material prices which were passed on to customers and during the last quarter about half month’s revenue was affected due to planned shutdown in February and finally last 8 days in March 2020 due to Lockdown imposed by the Govt to combat the spread of Covid-19. 

Operation at the Paper Mill was lower @ 86% due to above factors happening in Q4 as against 91% of the Capacity during the preceding year, 

Printing & Packaging Division operated with marginally higher Conversion tonnage.

Considering net effect of deferred tax & MAT credit charged, the net profit stood at INR 1,595 lacs. (Previous Year INR 1,837 lacs)

The report further predicts that, In the medium term, much of the growth in the packaging segment of the Industry is expected to be based on recycling of waste paper. This is already the trend in China. Indian paper companies in the packaging segment are also expected to fuel their near to medium term growth through waste paper imports from regions of surplus such as North America and Europe. Large Chinese producers have set up their own sourcing networks in these regions to supply their huge capacity additions; they possess relative buying strengths and constitute a cost threat to that extent. Over time, however, as domestic capacities stabilize and domestic collection improves, a larger proportion is expected to be sourced domestically with the fiber basket being upgraded by pulp imports. The strength of any firm in this industry is however expected to come from a presence throughout the supply chain from raw material to packaging production and delivery.

The report anticipates that, demand for paper in FY 21 is expected to decline due to Covid-19 imposed Lockdowns. Demand from education, packaging, corporate and print media sections declined owing to nation wide lockdown imposed to curb the spread of Covid-19 pandemic. Innovative cost containment and cost cutting will be required by paper mills to not only maintain business volumes but to capture a larger portion of a slowly growing pie.

   

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