ITC-PSPD: Subdued realizations and surge in domestic wood prices exerted pressure on margins; commissioned molded fiber products manufacturing

ITC-PSPD: Subdued realizations and surge in domestic wood prices exerted pressure on margins; commissioned molded fiber products manufacturing
-  A 6.7% year-on-year decline in revenue, totaling INR 2073 Crore in Q4FY24
-  ITC-PSPD earned INR 293 Cr, declined by 34.1% YoY in Q4FY24
- Foray into the fast growing premium Moulded Fibre Products (MFP) space with applications across industries including food serving and delivery, pharmaceutical, beauty and electronics.

The Pulp and Paper Times:

ITC's Paperboards and Specialty Papers Division (ITC-PSPD) has disclosed its financial results for the fourth quarter of FY24, revealing a 6.7% year-on-year decline in revenue, totaling INR 2073 Crore. The company attributes this downturn to competitive pressures from low-priced Chinese supplies in global markets, muted domestic demand, and surge in wood costs.

Global and Domestic Challenges: In its submission to the Securities and Exchange Board of India (SEBI), the company highlighted the subdued global demand and a slowdown in domestic demand . Paperboards, Paper and Packaging Segment remains impacted by low priced Chinese supplies in international markets (including India), muted domestic demand, surge in wood cost and high base effect. Demand environment remains subdued across domestic and global markets.

The report stated that subdued realisations and surge in domestic wood prices exerted pressure on margins; structural advantages of an integrated business model, Industry 4.0 initiatives, strategic investments in High Pressure Recovery Boiler and proactive capacity augmentation in Value Added Paperboards aided in partly mitigating pressure on margins. Despite the headwinds as aforestated, the Business further strengthened its leadership position in the Value-Added Paperboard (VAP) segment through focused innovations, development of customised solutions for end-use industries and strong end user engagements. 

During the year, the Company’s wholly owned subsidiary, ITC Fibre Innovations Limited, commissioned a state-of-the-art premium Moulded Fibre Products manufacturing facility in Badiyakhedi, Madhya Pradesh, to foray into the fast growing premium Moulded Fibre Products (MFP) space with applications across industries including food serving and delivery, pharmaceutical, beauty and electronics.
Capacity utilisation of Nadiad packaging and printing unit in Gujarat progressively ramped up. 

The state-of-the-art premium Moulded Fibre Products manufacturing facility commissioned in Mar’24.

“The Paperboards, Paper & Packaging Segment had to contend with soft domestic and export demand conditions which significantly depressed net realisations, cheap Chinese supplies in international markets including India, unprecedented escalation in domestic wood costs and high base effect.” The report outlined.

“Paper based sustainable alternatives designed to replace single-use plastics continue to be ramped up with ‘Filo’ series - ‘FiloBev’ (for cups), ‘FiloServe’ (for QSR, bakeries, food retail) & ‘FiloPack’ (packaging for sweets and deep freeze applications), witnessing strong growth momentum in both domestic and international markets. During the year, Flustix (No Plastic) certification also has been received for FiloPack. The Business is stepping up investments, in this fast-evolving space which holds immense growth potential, supported by the R&D capabilities of the Company’s Life Sciences & Technology Centre, and external collaborations with global specialists. The Business continues to focus on developing and scaling up several innovative solutions towards “Reducing, Reusing and Recycling” of plastics; these are under various stages of commercialization” the report said.

A pipeline of products developed through proprietary solutions such 10 as ‘Bioseal’ (compostable coating to replace plastics), ‘Oxyblock’ (recyclable coating solution to enhance barrier properties in packaging) and ‘Germ free coating’ (solution for microbial free packaging surface addressing the consumer consciousness towards hygiene and safety) have been introduced, with increasing adoption levels across end use segments.

Education and Stationery Products:

The Education and Stationery Products industry witnessed strong growth during the year driven by increased household penetration on the back of higher enrolment ratios and growing literacy. The year also witnessed heightened competitive intensity with a resurgence of regional players on the back of moderation in input prices. During the year, the Business consolidated its leadership position in the industry, driven by innovative product launches and portfolio premiumisation. 

The ‘Classmate Interaktiv’ Notebook portfolio continued to witness strong consumer traction driven by a wide range of differentiated offerings. These included products that enable ‘Do It Yourself’ activities with a view to ‘Enjoy Learning’, immersive technologies such as augmented reality and interchangeable covers. The Business also accelerated the adoption of ‘Classmate Pulse’ spiral format through targeted activations and focusing on new customer segments such as high school students, in addition to college goers and the youth segment. The ‘Paperkraft’ portfolio was also strengthened with the launch of a new range of notebooks with differentiated design themes catering to both personal and professional usage. The Writing Instruments portfolio delivered a strong performance on the back of recent launches with differentiated forms and features which received encouraging consumer response. 

The Business sustained its leadership position on e-Commerce platforms through consistent availability of a wide assortment of products, backed by focused interventions to enhance consumer traction. 

During the year, the Business enhanced its manufacturing capacity of spiral notebooks at its dedicated manufacturing facility at Vijayawada. Equipped with state-of-the-art technology, the facility enables the Business to develop differentiated notebook formats, drive cost reduction and address opportunities in overseas markets.

Packaging and Printing Business:

Packaging and Printing Business continues to be acknowledged as a ‘first choice packaging partner’ by several reputed FMCG companies in the country for providing superior and cost-effective packaging solutions incorporating high quality structural design, print embellishments, enhanced security features and design–for–recyclability. During the year under review, the packaging and printing industry witnessed several headwinds. Subdued demand in certain key end user industry segments, progressive de-cartonisation in the liquor industry and decline in price realisations rendered the operating environment extremely challenging. The recent capacity addition at Nadiad, Gujarat, with state-of-the-art equipment to cater to markets in Western region, has further augmented the Business’ capabilities in Carton packaging. Capacity utilisation at the facility has been progressively ramped up during the year.
 

Web Title: ITC-PSPD: Subdued realizations and surge in domestic wood prices exerted pressure on margins; commissioned molded fiber products manufacturing