Kuantum Papers remains insulated from rising imports, which primarily serve coastal markets, and anticipates an upward trend in paper prices

Kuantum Papers remains insulated from rising imports, which primarily serve coastal markets, and anticipates an upward trend in paper prices

-Kuantum Reports Steady Growth Amidst Challenges in FY25 | Q3 & Nine Months Financial Results
-Net profit for the quarter (Q3 FY25) was INR 21 crores, down 30% on a Q-on-Q basis, with PAT margins reported at 7.77%.
-Mr. Pavan Khaitan, Vice Chairman and Managing Director of Kuantum Papers Ltd., addresses the shareholders during the Q3 FY25 earnings conference call on 14th Feb
The Pulp and Paper Times

The paper industry faced a turbulent financial year 2025, marked by high import levels, supply chain disruptions, and a decline in paper prices following global market corrections. Despite these challenges, Kuantum Papers Ltd, has demonstrated resilience, achieving significant volume growth and maintaining steady operations during nine months ended by December 2024. Through strategic cost optimization and expansion plans, the company has positioned itself for sustained growth in the evolving market landscape.

Strategic Initiatives for Cost Optimization and Expansion

Kuantum has undertaken various strategic initiatives to enhance efficiency and reduce costs while continuing its expansion plans. In November 2024, the company launched a comprehensive cost optimization plan across 11 verticals, targeting annualized savings of INR 40 crores. A significant contributor to this savings is Project Nirmaan, an AI-driven initiative expected to save INR 15 crores. Additionally, the company commissioned twin roll presses for both agro and wood pulp streams, resulting in reduced chemical consumption, lower effluent load, and a daily reduction of 1,800 cubic meters in fresh water usage.

Additionally, a new variant of the Kuantum Korra product, made with over 90% agro-furnish, has been developed at our mill, offering exceptional smoothness and quality. These initiatives, apart from the various others undertaken in the past, have resulted in the company being able to withstand the market pressures of declining sales realization. The company was able to maintain a strong EBITDA margin of 18.66% for Q3 of this financial year and 22.02% year-to-date. This was also supported by the benefits of lower costs of agro-pulp, improved product mix, and reduction in power and fuel costs.

We are also pleased to report that the mill expansion project, with an investment of INR 735 crores, is progressing as per schedule, with some project supplies and installations already having been completed. We expect the project to be fully commissioned by March 2026, further strengthening our operational capabilities and taking the production capacity up by 50%.

Consistent Volume Growth and Market Strategy

Kuantum attributes its volume growth to the consistency of its operations and a strong market presence. The company follows a strategy of collecting orders in advance and producing accordingly, ensuring stable demand. With a nationwide dealer network, Kuantum has successfully maintained consistent quarterly volumes between 41,000 and 43,000 tonnes, cumulatively achieving 1,25,000 tonnes over nine months.

Looking ahead, the company anticipates an increase in production with upcoming machine upgrades. One of Kuantum’s key machines is set for an upgrade by June 2025, which is expected to significantly boost output in Q2 of FY26.

Financial Performance

For the Q3 of FY 24-25, operational income to date is INR 270 crores, reflecting a decline of 3% quarter-on-quarter. EBITDA was INR 50 crores, which was 17% lower on a Q-on-Q basis. EBITDA margins stood at 18.66%, and net profit for the quarter was INR 21 crores, down 30% on a Q-on-Q basis, with PAT margins reported at 7.77%.

On a nine-month basis ended on December 2024, operational income was reported at INR 830 crores, a decline of 9% year-on-year. EBITDA was INR 183 crores, representing a decline of 32% year-on-year, with EBITDA margins of 22.02% for the period. Net profit was INR 89 crores, down 41% year-on-year, with PAT margins reported at 10.74%.

Impact of Imports and Global Disruptions

The paper industry in India is currently experiencing increased imports, suppressing market prices. Compounding this issue, exports to European and Western markets have declined due to the ongoing Red Sea crisis and rising shipping costs. This has led to an oversupply situation domestically, placing downward pressure on prices.

However, demand is expected to grow in the coming quarters, particularly with the implementation of the new education policy, which will necessitate printing new textbooks in 22 Indian languages. Government tenders are also projected to contribute to increased demand.

Industry associations, including Kuantum, have appealed to the government for intervention. Anti-dumping measures for copier paper are under consideration, and there is optimism that further action may be taken post-elections to protect the domestic market.

Strategic Advantage in Addressing Import Challenges

While imports continue to affect coastal regions, Kuantum remains insulated from these challenges due to its strategic location in Northern India. Nearly 50% of its production caters to markets in and around Delhi, minimizing the impact of imported paper, which predominantly serves coastal regions.

Wood Supply and Pricing Trends

The growing MDF industry has heightened competition for wood supplies, causing price increases. However, Kuantum is actively addressing this challenge through extensive social forestry programs and sapling distribution initiatives. The company has significantly increased its annual sapling production from 8 lakh to 40 lakh, ensuring a steady future supply of wood.

With trees planted in 2018-19 now maturing, the industry is expected to see an increase in wood availability in the coming years, helping stabilize prices.

Paper Prices: A Turning Point Ahead

Despite the market challenges, Kuantum has maintained stable pricing, with no reductions in the past quarter. The company believes that price bottoming has already occurred, and an upward trend is expected in the coming quarters. By the end of Q1 in the next financial year, or possibly earlier, a market turnaround is anticipated.

Outlook for the Future

While challenges persist, Kuantum’s strategic initiatives, operational consistency, and market positioning place it in a strong position for future growth. With rising demand, technological advancements, and government support, the company is poised to achieve higher volumes and improved profitability in the coming quarters.
 

Web Title: Kuantum Papers remains insulated from rising imports, which primarily serve coastal markets, and anticipates an upward trend in paper prices