Seshasayee Paper expects to spend another Rs. 200 crore on Servalakshmi Paper Mill to resume production; SPB registered a fall in net profit in FY24

Seshasayee Paper expects to spend another Rs. 200 crore on Servalakshmi Paper Mill to resume production; SPB registered a fall in net profit in FY24

Key Points
- The International market has not shown any signs of recovery and the drop in price mainly from Indonesia and China continue. Demand remains flat although some short-term bumps are seen.
- domestic market conditions are expected to remain challenging at-least untill the first 2 quarters of the FY 2024-25 for W&P grades

The Pulp and Paper Times:

Seshasayee Paper and Boards Limited (SPB), an Integrated Pulp, Paper and Paper board Mill, and the flagship company belonging to Writing and Printing paper manufacturing in India, has registered a fall in net profit during FY 2023-24 compared to corresponding period of previous year.

SPB Profit after tax stood at Rs 259 crores in the FY 2023-24 as against Rs 386 crores in the previous year.

The International market for Paper, which remained extremely buoyant by end of calendar year 2022, had seen severe pricing pressures by the end of Q4 of previous year, with the reduction in International Pulp Prices and Ocean Freight Charges. This had continued in to FY 2023-24 as well. The International market has not shown any signs of recovery and the drop in price mainly from Indonesia and China continue. Demand remains flat although some short-term bumps are seen.

“Reduction in the average realisations in the export market and significant increase in the cost of wood, a key input material for the company. Wood procurement prices almost doubled during the year. The market conditions were favourable and buoyant for most varieties / grades of Writing & Printing (W&P) during the entire FY 2022-23. However, effective May 2023, the Domestic Paper market had turned adversely” the annual report of SPB for FY 23-24 stated.

On Servalakshmi, Mr. N Gopalaratnam, Chairman of Seshasayee Paper and Boards mentioned, I think the capacity will be about 75000 tons annually. Our Erode Unit has a capacity of 1,65,000 tonnes p.a. Our Unit-2 in Tirunelveli has a capacity of 90,000 tonnes p.a. With Commissioning of Servalkshmi Unit and 75,000 tonnes getting added, the total capacity of the company will become 3,30,000 tpa.

He further stated that we have started doing some initial work for receipt of power, water connection, and also get the permission from the pollution control board. These works are currently going on and we'll also now start taking up the refurbishment activities.  The refurbishment should take about nine months. But Servalakshmi mill has been remaining shut for more than seven years. The acquisition cost so far is about Rs 105 crores.  I do expect that by the time we come into production, we have to spend about another two hundred crores.

SPB participated and emerged as the sole successful bidder in the e-auction held on 19.09.2022, for the sale of assets of M/s.Servalakshmi Paper Limited (In Liquidation) (Corporate Debtor), on a Going Concern basis and the company had remitted the entire bid value of INR 105.0 crores in the month of October 2022.

The annual report further stated that, “The overall unfavourable global demand situation resulting in increased supply situation to the Indian Market, thereby resulting in Demand-Supply mismatch. Also, increased availability of Imported Paper from China, Indonesia and other Asian countries, at cheaper prices in the Indian market. Both these factors contributed to significant reduction in the prices of Paper during the year. Price reduction were seen almost every month from May 2023. Domestic Paper mills had to drop prices to liquidate their production and inventory. Though the overall consumption levels of Paper in Domestic Market remained stable, prices have dropped significantly during the year, thereby affecting the margins of the Indian Paper Mills in the FY 2023-24 compared to an extremely favourable and buoyant FY 2022-23.

The report anticipates that domestic market conditions are expected to remain challenging at-least untill the first 2 quarters of the FY 2024-25 for W&P grades, as per the present market trends. The demand for paper and more particularly, the market operating prices will depend on the Global macro-economic trends. With fear of possible recession in some of the key developed economies and distressing global political situations, prices of Paper is expected to see continued pressures in the short-medium term. Considering the uncertainties that continue to prevail in global macroeconomic situation and subsequent slowdown in developing countries, the market is expected to be very cautious and seek for replenishment of inventory only when necessary without room for any speculation.

OPERATIONS 
-The Company had registered the following landmarks during the FY 2023-24, in-spite of challenging market conditions.  
-2nd highest annual production at 2,40,383 tonnes. (Highest production - 2,41,145 in FY 2022-23). ™ Highest ever Annual Production in Unit : Erode - 1,65,116 tonnes.  
-2nd highest annual sales at 2,23,254 tonnes (Highest sales - 2,40,649 tonnes in FY 2022-23). 
-2nd Highest Total Income – INR 1853.04 crores (Highest Total Income at INR 2113.05 crores in FY 2022-23). 
-2nd Highest PAT at INR259.37 crores (Highest PAT at INR 386.54 crores in FY 2022-23).
 

Web Title: Seshasayee Paper expects to spend another Rs. 200 crore on Servalakshmi Paper Mill to resume production; SPB registered a fall in net profit in FY24