The Hindu Business Line : Seshasayee Paper to set up pulp mill; PAT down at Rs 6.58 cr

SESHASAYEE Paper and Boards Ltd will set up a new pulp mill with enough capacity to meet its present requirement and any expansion it may consider later.

The company is also getting into contract farming of pulp wood plantations, which would be a captive source of wood. According to company officials, the board has, in principle, approved the investment for the pulp mill but the details are being worked out.

The new pulp mill, which will replace the existing one, will double Seshasayee Paper's pulping capacity to about 500 tonne a day, enough to handle even future expansion. The existing mill, which produces about 240 tonnes of pulp, meets about 75 per cent of its pulp requirement and the balance is met through imports. Its paper mill produces about 330 tonnes of paper a day.

According to Mr V. Pichai, Director (Finance), the pulp mill and a 20-megawatt (MW) captive power plant that were recently commissioned represent significant advantages to the company. Power and raw material costs have a major impact on production costs and both are being addressed, he said.

The power plant represents a saving of about Rs 1,500 in energy cost on every tonne of paper. For a mill that produces about 1.20 lakh tonnes paper a year, the savings are huge, he said.

Similarly, raw material will also be produced in-house, which means that the company will not have to depend on imported pulp, and can insulate itself from price rise and fluctuations.

The modern pulp mill will offer other advantages such as environmental compliance. Also tied in with this project are additional facilities that will help recover steam and generate power.

Mr K. S. Kasi Viswanathan, Director (Operations), said that the in-house pulp would mean that the company could churn out products of consistent pulp quality and reduce downtime. The company is optimistic about its performance for the coming year with the market expected to be buoyant and costs under control.

He said that the company is tying up with farmers for cultivating casuarinas and eucalyptus, which can be used for making pulp. By November, it would have about 3,000 acres under the scheme and it is targeting 6,000 acres for the next year, he said.

The company has reported a profit after tax (PAT) of Rs 6.58 crore on sales of Rs 354.29 crore for the year ended March 31, 2005. This is against a PAT of Rs 19.66 crore on sales of Rs 344.20 crore last year.

The company has attributed the drop in profit to the 20 - 25 per cent hike in the cost of fuel and raw materials, including wood, bagasse, coal and lignite. Also, the reduction in value of duty entitlement pass book licences and the increase in employee cost following a wage settlement had driven up costs.

It produced 1.18 lakh tonnes (1.17 lakh tonnes) of paper and sold its entire production to achieve nil stock on March 31, 2005.

The board has recommended a dividend of Rs 1.80 (18 per cent) a share for 2004-05.

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