Shreyans Industries reports net profit of INR 31 Cr. for FY19-20; CAPEX planned to improve operating parameters and cost effectiveness

The paper manufacturing giant in the writing and printing segment, Shreyans Industries Ltd has registered a net profit of INR 31 cr. for FY-19-20, which is 33 percent lower compared to the previous year's profit (FY 18-19). The company stated in its annual report for FY19-20 that Prices of writing and printing paper, after having shown a significant increase in the earlier year, started coming down during the year under review and this trend of fall in prices continued in major part of the year. This resulted in fall in revenue of the Shreyans Industries despite production being only marginally lower. This coupled with normal increase in prices of some inputs and other overheads resulted in fall in profits of the Company.

During the year under review, Shreyans Industries has achieved a production of 88,307 MTs as against 89,562 MTs in the previous year. Total revenue of the company was INR 546.33 crores against INR 579.89 crores of last year; Profit before interest & financial charges and depreciation stood at INR 47.68 crores. Net profit after tax stood at INR 31.96 crores against INR 46.95 crores of last year.

4th quarter was also impacted due to Covid-19 pandemic outbreak resulting in nationwide lockdown which has resulted in marginal fall in production and also the profitability.

However, due to continuous investments done in new technology and improvement in operation parameters, this fall in profitability could be kept to the minimum. 

Shreyans Industry has planned capital expenditure in the current year in order to make its operation more cost-effective, efficient and quality-oriented. Details of proposed capital expenditure have been discussed while reviewing the performance of both the units. Capital expenditure planned will help the Company in improving its operations in terms of quality and operating parameters and better cost-effectiveness.

Our focus for the last few years has been on enhancement of our product quality and at the same time reduction in costs and increase in efficiencies. These initiatives were pursued with vigour during the year under review with significant positive results.

The total production of paper in this unit was 51,088 MTs, which was higher as compared to last year's level of 49,858 MTs. Capital expenditure planned during the current year includes strengthening of bleach plant to improve the quality of end product and optimize the consumption of chemicals. Also, a higher capacity captive power plant in this unit has been planned, which will meet the entire requirements of electrical power in this unit at a much lower cost as compared to grid tariff, thus adding to the bottom line of the Company. Both the above major projects are expected to be commissioned in 3rd quarter of the current year. This will help the unit to further improve its operations in terms of quality, cost-effectiveness and better environmental performance.

Total paper production in this unit was 37,219 MTs which was slightly lower as compared to last year's production of 39,704 MTs. Capital expenditure proposed in this unit includes the provision of Oxygen Delignification stage in the pulp mill, additional fluidized bed reactor for Chemical Recovery to meet the enhanced requirement of the plant, heated calendars and steam condensate system at the paper machine to improve the quality and optimize the steam consumption. These are also expected to be completed in the 3rd quarter of the current year and would add value to the operations of the unit.

The annual report states, however, operations of the Company have been severely affected due to the current Covid-19 pandemic spread. Production operations in both the units had to be suspended due to lockdown in the 4th week of March 2020 and production could start only towards the end of April 2020. The Company is engaged in the manufacturing of writing and printing paper and the education sector is the biggest user/consumer of writing and printing paper. Due to Covid-19, all schools, colleges, and other educational institutions have been shut down right from March 2020 till date, and even as of date there is no clear indication when these institutions will reopen. 

“This has severely affected the consumption and demand of paper and consequently operations of the company have been adversely affected. While on one end the demand of paper has come down significantly, the prices of paper have also corrected very sharply. Both the units currently are operating on significantly reduced capacity. We are keeping a close watch on the situation and are making all-out efforts to minimize the impact of this challenging situation. Based on the current estimates, we do not envisage any default in meeting our financial and other obligations and do hope that things should start improving from 3rd quarter of the current year,” Report says.

The report further said that, after a considerable increase in paper prices during the year 2018-19, due to various internal and external factors, the prices of writing and printing paper cooled down during 2019-20 and on a year-to-year basis this fall was more than 12% - 15%. However, prices of paper improved in the 4th quarter of 2019-20 till the entire industry came to a standstill due to lockdown declared after the Covid-19 pandemic and there has been a continuous decline in prices and demand of paper thereafter due to closure of all educational institutions and other activities.