ITC-PSPD expects to drive structural improvement in CPP profitability, focus on scaling up wood sourcing, embark upon a Supply Chain Transformation Project

ITC-PSPD expects to drive structural improvement in CPP profitability, focus on scaling up wood sourcing, embark upon a Supply Chain Transformation Project

-The levy of Anti-dumping duty on Décor paper has partially provided a level playing field for domestic industry
-ITC’s initiatives such as bund plantations and scaling up plantations in new catchment areas in Odisha and Chhattisgarh
-ITC-PSPD recycled around 1.1 lakh tonnes of waste paper during the year

The Pulp and Paper Times

ITC’s Paperboards, Paper and Packaging Businesses have made significant progress in recent years in terms of enhanced scale and profitability improvement. While the current year ( FY 24-25) performance was impacted by low priced Chinese & Indonesian supplies in global markets including India, soft domestic demand conditions and unprecedented surge in wood prices, strategic interventions continue to be made in areas spanning plantations, sharpening the product portfolio and thrust on structural cost management.

After achieving record highs in FY 2022-23, the domestic industry has faced significant challenges over the past two years. The industry contended with a difficult operating environment, characterised by low-priced supplies of paperboards and paper from China and Indonesia in global markets, including India, as well as weak demand conditions, resulting in subdued realisations.

On the inputs front, wood prices witnessed sharp escalation during the year, with wood availability and quality being significantly sub-optimal on account of lower plantations during the pandemic period and higher demand from competing Wood Based Industries (WBI).

The cumulative impact of subdued realisations, excess supply in domestic markets led by unprecedented increase in low-priced imports into India from China, Indonesia etc., sharp surge in wood costs, and currency-led volatility exerted pressure on margins during the year. ITC-PSPD was able to partially mitigate the impact of these challenges by leveraging structural advantages of the integrated business model, stepped-up end-user engagements, Digital interventions and increase in salience of exports and Plastic substitution (PlaSub) products.

ITC-PSPD has also undertaken several initiatives to address the challenges of wood availability and surge in costs, including inter alia, opportunity based wood imports, evaluation of leased plantation models, and acceleration in plantations in collaboration with industry stakeholders. ITC is pioneering a first ever initiative in Indian Wood Based Industry using satellite imaging for plantation monitoring and wood assessment to monitor pulpwood plantations and assess future harvestable wood quantity available in various catchments.

During the FY 24-25, the Specialty Papers segment witnessed robust growth driven by capacity augmentation in Décor paper. Market standing in the segment continues to be driven by product mix enrichment and diversification of the customer base. The domestic industry remained under pressure due to cheap supplies from China. The levy of Anti-dumping duty on Décor paper has partially provided a level playing field for domestic industry, which is critical towards fostering domestic value chains and enabling import substitution.

During the FY 24-25 ITC signed a Business Transfer Agreement to acquire the Pulp and Paper Undertaking (‘CPP’) of Aditya Birla Real Estate Limited (‘ABREL’) at Lalkuan (Nainital, Uttarakhand). Commissioned in 1984, CPP is a well-established player in the Indian Paper industry with an installed capacity of 4.8 Lakh tonnes per annum. CPP is a one-of-a-kind asset with a strong strategic fit with your Company’s Paperboards & Specialty Papers Business. The acquisition (which is expected to be completed in about six months) will immediately add significant scale and economies to existing operations with potential for further capacity expansion, provide locational advantage for efficient customer servicing and proximity to key raw material sources, mitigate operational risks through multi-site operations and enhance resilience across industry cycles through portfolio diversification. The Business expects to drive structural improvement in profitability of CPP through several value unlock interventions such as capacity debottlenecking, product quality upgrade, efficiency improvement leveraging TPM/Digital initiatives, supply chain optimisation, costs and procurement efficiencies. The acquisition is also expected to strengthen the market standing of ITC’s Paperboards and Specialty Papers Business and engender new opportunities in the domestic and international markets.

ITC’s Paper and Paperboard division continues to procure wood, a key raw material, from sustainable sources. Research on clonal development has resulted in introduction of high-yielding and disease-resistant clones that are adaptable to a wide variety of agro-climatic conditions. This has not only aided in increasing farmer incomes but has also enabled greater consistency in farmer earnings. In this context, ITC’s Life Sciences & Technology Centre is engaged in developing higher yielding second generation clones with enhanced pest and disease resistant attributes. The Business continues to focus on scaling up wood sourcing from core areas and has increased plantations in core area during the year. In addition, initiatives such as bund plantations and scaling up plantations in new catchment areas in Odisha and Chhattisgarh have enabled procurement of nearly 10% of total wood requirement of the Business from such new areas, with further potential for increasing cost-effective access to fibre in the future. Business has achieved highest ever plantation area of ~65000 ha (growth of appx. 30%) during the year.

ITC has received FSC®-FM certification for over 1.49 lakh acres of plantations involving over 25000 farmers. During the year, nearly 4.85 lakh tonnes of FSC®-certified wood was procured from these certified plantations. Your Company sustained its position as the leading supplier of FSC®-certified paper and paperboards (FSC®-C064218) in India.
ITC-PSPD also embarked upon a Supply Chain Transformation Project ‘OJAS’, establishing a dedicated supply chain vertical to enhance customer service and realise value from supply chain optimisation. This initiative has led to significant improvements in On-Time-In-Full (OTIF), reductions in Order to Delivery Time (ODLT), and other customer service delivery metrics.

The Business has adopted the principles of Total Productive Maintenance (TPM), Lean and Six Sigma for over a decade and continues to reap substantial benefits through several Business Excellence initiatives.

All manufacturing units of the Paper and Paperboard division continue to recycle nearly 100% of the solid waste generated during operations by converting the same into lime, fly ash bricks, cement, grey boards, egg trays etc. In addition, the Business recycled around 1.1 lakh tonnes of waste paper during the year, thereby sustaining positive solid waste recycling footprint of the Business.

In line with the objective of enhancing the share of renewable energy in its operations, the Business has implemented several initiatives including investments in a green boiler, high efficiency circulating fluidised bed boiler, solar & wind energy and increased usage of bio-fuel. The recently commissioned state-of-the-art and future-ready High Pressure Recovery Boiler at the Bhadrachalam mill is progressively enhancing energy efficiency and reducing the carbon footprint of the unit’s operations by significantly lowering coal consumption by appx. 25%.

While cheap imports from China as well as from ASEAN countries remain a potential threat in the short run, the Business remains confident of leveraging its competitive strengths to mitigate the impact thereof. Representations continue to be made at appropriate forums for suitable measures to safeguard domestic industry. Directorate General of Trade Remedies (DGTR), Ministry of Commerce and Industry, India has also initiated an Anti-Dumping investigation on Virgin Paperboard originating from China and Chile. Indian Paper Manufacturers Association (IPMA), National Industry body has also approached Ministry of Commerce for considering imposition of Minimum Import Price (MIP) on import of paperboards into India.

ITC continues to engage with policy makers to address key industry challenges including increasing wood availability through collaborative public-private plantation models to strengthen the competitiveness of domestic industry and arrest the rapid increase of low priced imports of paper & paperboard into the country.

ITC is confident of further consolidating its leadership position in the Indian Paper and Paperboards industry leveraging recent investments in innovation platforms anchored on the development of sustainable products and cutting-edge digital technologies to set new benchmarks in customer satisfaction, operational excellence, and sustainability.

The Above views has been extracted from ITC’s annual report for FY 24-25
 

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