Seshasayee Paper expects weak demand in Q4; price of paper has to be partially rolled back

Seshasayee Paper expects weak demand in Q4; price of paper has to be partially rolled back

-Seshasayee Paper and Boards Limited (SPBL) reports INR 5.90 Cr profit after tax for the quarter ended on 31st December 2021.

Erode | 25th January 2021 | The Pulp and Paper Times

An Integrated Pulp, Paper and Paper board Mill of India, Seshasayee Paper and Boards Limited (SPBL) is not assuming the outlook of the paper industry bright in Q4 for FY 21-22.  

Releasing the financial figures for the quarter ended on 31st December 2021, SPB’s Chairman Mr. N Gopalaratnam says, market demand improved in the beginning of the third quarter. However next wave of Covid-19 virus and consequent lockdowns announced in January 2022 have affected the order inflow. Price increases announced in Q3 2021-22 have to be partially rolled back in January 2022, considering weak demand situation.

“The outlook for Q4 of FY 2021-22 appears unsettling due to lockdowns affecting the demand for Paper from educational sector. The weaker demand is expected to put further pressure on selling prices and margins. Packaging grades are expected to have stable demand during this period.” He said in a statement.

The statement says that production during the period April - December 2021 was higher than corresponding period in the previous year mainly due to better order flow from the Export markets. However, the production during the quarter October - December 2021 was lower compared to the previous quarter, mainly due to shut undertaken in one of the Paper Machines for upgradation under MOP-Ill.

PROJECT: MILL DEVELOPMENT PLAN - III (MOP - III) AT UNIT: ERODE 

-SPBL’s Wood Pulp Mill and Recovery Modules in Unit: Erode were shut for 45 days during the quarter ended December 31, 2021, for Upgradation jobs. One of the Paper Machines was also shut for about 35 days for upgradation jobs. 

-These shuts didn't materially affect paper production during this period, since the Company had sufficient stock of in-house pulp board to support the Paper Machine requirements.

                     

-However, the Pulp Mill and Recovery Boiler shuts resulted in higher material and energy costs, resulting in lower operating margins during the quarter October-December 2021, due to consumption of costlier pulp and power. 

-The project MOP-Ill is nearing completion with major upgradation works in Chemical Recovery Plant, Wood Pulp Mill, Paper Machine - 5, Paper Machine - 2 and Paper Machine - 4 having been successfully completed. Project is expected to be completed at a cost lower than the originally projected cost of INR 315 crores.

PROFITABILITY 

Higher volumes of production and Sales contributed to improved profitability during the nine months ended December 2021 compared to corresponding period in the previous year. 

The benefits arising out of improved volumes and better operational efficiency were partly negated by the following: 

- Significant Increase in energy costs, mainly on account of exorbitant price increases for Coal.

- Increase in prices of Key Input Materials like Wood, Chemicals, etc., 

- Significant increase in Logistics costs.

- Consumption of costlier pulp and power, during the shutdown period of Pulp Mill & Recovery Boiler under MDP-III.

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