Seshasayee Paper and Boards expanding its Product Mix to minimize the pressure of demand on WPP; earned INR 18.56 Cr profit after tax in Q1

Seshasayee Paper and Boards expanding its Product Mix to minimize the pressure of demand on WPP; earned INR 18.56 Cr profit after tax in Q1

After MDP-III completion, SPBL might next concentrate on Tirunelveli’s unit for further investment.

Erode | 24th July 2021 | The Pulp and Paper Times : 

With the expectation of Demand  to pick up and grow by 11-15% year on year in fiscal 2022 with schools, colleges and office spaces are expected to open and drive the demand, Seshasayee Paper and Boards Limited (SPBL) expects a stronger Q3 and Q4 of FY 21-22 with a large set of our population getting vaccinated by then and general economic mood turning positive.

“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 a huge drop in revenue and profits during the financial year ended March 31, 2021,” Mr. N Gopalaratnam, Chairman – SPBL said during 61st Annual General Meeting of the company.

During Q1 of fiscal 21-22, its revenue stood at INR 218 crore against INR 139 crore in the year-ago quarter (Q1 FY 20-21), while profit after tax was INR19 crore against  INR 18 crore.

Replying to a shareholder question Gopalaratnam says, our dependence on Printing and Writing is high and that is where our margins are high. This segment is not going to be permanently under stress. Lot of efforts have been taking by the Government on education; new education policy has been developed. Worldwide, India is considered to be the main country for printing and writing paper. This is not the end of the growth of Printing and Writing Paper.

“For 2-3 years, the impact of Covid will be there. We are now creating alternate products, just to be in those markets. We already have a large product mix and we are expanding this further to include Kraft and multi-layer boards. Product mix will be altered depending on demand,” he said.

On the question of demand environment and Sales realization, Mr. Gopal says, Demand is more muted now. In fact, Our sales was more than 100% of our capacity in March. April it came down to 70%; May at 42%; June picked up and moved to 70%. Currently, we would be at about 80%. Our Production levels are around 85-90%. Similarly, Sales realization has also started coming down. We have been impacted by significant increase in cost of input materials like wood, pulp, coal, waste paper. On top of it, there is lack of demand. We have a lot of challenges.

A shareholder asks that what is the reason that other countries created scale benefits with mega-size plants but in India, industry is still fragmented?,  Mr. Gopal replies that reasons applicable to agro-industries is also applicable to the integrated wood mills. We have a very poor raw material base. Our access to good quality raw materials is a problem. Wood based Paper units individually meets 95% of its wood requirements thro’ Tree farming. These happen in small scale in marginal farmers lands. Their prices are exorbitant when compared with international prices. We spend about 120 US $ per t of wood in India, whereas outside India, it is about US $ 60. Proposal for allocation of waste land to paper mills for wood plantation, has been pending with various Governments for a long time.

“We have not allowed the machines to shut as much as the others were doing. We use them somewhat beneficially to produce pulp board. Definitely the strategies have helped in delivering superior profits,

“On next Growth project of SPB – Covid has given confusing trends. We have to wait for 3-4 months. Anyway, our next growth strategy will be in Unit – Tirunelveli,” Mr. Gopalaratnam informed the shareholders.

Mr. Gopalaratnam looks optimistic on the revenue side, on completion of MDP-III, SPBL might be at Rs 1500 crores with better margins.

                     

Web Title: Seshasayee Paper and Boards expanding its Product Mix to minimize the pressure of demand on WPP earned INR 18 56 Cr profit after tax in Q1