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Greenply Industries Ltd, the Rs 2,000-crore interior infrastructure company that makes plywood and allied products, plans to outsource its mid-segment brands Ecotech and Optima, and use the spare capacity to produce high-margin premium offerings under the Greenply brand to push profit higher.
High-end products have a margin of nearly 14 per cent.
According to V. Venkatramani, Chief Financial Officer, the initiative is expected to improve the company’s profit in one-and-a-half years.
Currently, Greenply has a combined annual production of 32.4 million sq m of plyboard across four facilities in Nagaland, West Bengal, Gujarat and Uttarakhand.
About half of its output is in the mid-segment. Another 10 million sq ft of mid-segment offerings are outsourced.
The company is targeting a 30 per cent increase in outsourcing of the mid-segment offerings, taking the tally to around 13 million sq feet.
“We will use our existing facilities for high-end offerings under the Greenply brand, while focus on outsourcing products in the mid-market categories. Margins over a six-quarter period will improve to 10 to 10.5 per cent from the existing 9.15 per cent,” Venkatramani told Business Line .
According to him, the company plans to expand its capacities in the medium density fibre board (MDF) and particle board categories. MDF and particle boards are used in furniture-making.
Greenply, he said, is looking to set up a green-field venture in Andhra Pradesh, and has already acquired about 60 acres for around Rs 19 crore. Construction work for the proposed unit is expected to begin by next July.
“We are yet to decide on the production capacities. Hence, investment details have not been finalised,” Venkatramani said.
The company’s lone MDF facility is in Uttarakhand with an annual capacity of 0.18 million cubic metres.
Greenply, has formed a 50-50 joint venture with Alkemal Singapore Pte to set up a Rs 50-crore veneer unit in Myanmar. A local subsidiary, Greenply Myanmar Industries, has already been floated for the purpose.
Wood availability
According to Venkatramani, the move will ensure a steady availability of wood from the country. Almost a third of the company’s raw materials are sourced from Myanmar, Indonesia and Malaysia.
“Myanmar has been discouraging exports of wood and they are likely to ban it soon in favour of value-added products. If this happens, then our raw material sourcing will be affected. The unit will secure our raw material availability,” he said.
abhishek.l@thehindu.co.in
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