JK Paper confronts operational challenges in Q3, grapples with price pressures; Eyes promising recovery in Q4

JK Paper confronts operational challenges in Q3, grapples with price pressures; Eyes promising recovery in Q4

The Pulp and Paper Times | 9 Feb 2024

JK Paper Ltd., one of India’s largest Paper & Packaging Solutions Companies, recorded a Turnover of Rs. 1,781.65 Cr, EBITDA of Rs. 428.34 Cr and Profit after Tax (PAT) of Rs. 235.11 Cr on Consolidated basis for the quarter ended December’23. For the nine months period ended December 2023, the consolidated turnover was 5,195.39 Cr, EBITDA Rs. 1,426.42 Cr and PAT Rs. 846.13 Cr.

In a recent discussion with CNBC TV18, Mr. AS Mehta, President and Director of JK Paper, shared insights into the current state of the writing and printing paper market, along with the financial results of JK Paper, which experienced a decline in share value following an operationally subdued third quarter. Despite a 2.7% annual increase in revenues, the company encountered margin pressure due to heightened input costs.

When questioned about the breakdown of the 2.7% top-line growth, Mr. Mehta provided a detailed analysis, emphasizing the impact of volume growth and realization. He explained that the volume growth for Q3 was approximately 5%, but the actual realization growth was limited to 2% due to a substantial drop in prices and Net Sales Realization (NSR) pressure.

Further elaborating on the challenges, Mr. Mehta discussed the divergence between rising pulp prices and stagnant global paper prices. He attributed this to lower packaging board prices in Q3, driven by increased dumping, which established a benchmark for domestic prices. Import threats and the non-alignment of global paper and board prices with pulp prices contributed to the overall pressure on JK Paper.

Asked about the numerical impact, Mr. Mehta clarified that the increase in pulp prices had a minimal impact on JK Paper due to its full integration in chemical pulp. He highlighted that chemical pulp prices dictated global paper prices, thereby influencing the company's overall performance.

Regarding volume growth, Mr. Mehta acknowledged challenges in the writing and printing sector. He cited the delayed initiation of the new education policy and the dumping of writing and printing paper by Indonesian players as contributing factors. Despite a Q3 pickup in packaging board demand, writing and printing remained subdued. However, Mr. Mehta expressed hope for an improved demand scenario in the upcoming quarter, traditionally strong for writing and printing paper.

When questioned about the outlook for the Jan to March quarter, Mr. Mehta cautiously endorsed a potential recovery based on the observed pickup in January. He emphasized the significance of monitoring developments in February and March, especially with tenders, budgets, and key milestones for textbooks and government publications, which typically lapse in March. The company remains cautiously optimistic about potential recovery and improved volume growth in Q4.

Commenting on the results, Mr Harsh Pati Singhania, Vice Chairman & Managing Director, said, “The results have been impacted due to overall drop in sales realisation and substantial increase in wood cost. The selling prices have been under pressure for some time due to rising trend in imports coupled with weaker demand scenario.”
 

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