Century Ply looking at post-GST price hike

Abhishek Law Kolkata | Updated on January 09, 2018

SAJJAN BHAJANKA, Chairman, Century Ply   -  PTI

Plywood major’s profit down 21% in first quarter

The introduction of GST and the potential elimination of the unorganised sector have given Century Plyboards India a cause to increase prices and pass on the cost push.

Post GST, the company has initiated a 10 per cent hike in plywood prices across East Indian States and Madhya Pradesh. This was primarily to offset the low VAT rates prevailing in those geographies. Compared to the rest of the country, where the VAT rates were 14-15 per cent, in those States, it was as low as 5 per cent.

Nationally, plywood prices moved up by 1 per cent post GST, sources said.

According to Sajjan Bhajanka, Chairman, Century Ply, the company is looking at a 2-3 per cent price rise in two phases across plyboard categories this fiscal. “The first round of price hike is expected in September. We have not hiked product prices all through FY17 and have been absorbing any cost increase. This time we need to revise prices in order to retain margins,” he told BusinessLine in an interview.

GST-related destocking and the inability to pass on price hikes, coupled with slowing realty sales, saw Century Ply post a near 21 per cent profit decline to ₹34 crore in the first quarter of FY18 on a year-on-year basis. Total income stood at ₹473 crore. The company’s operating profit margin stood at 8.9 per cent, a decline from the 12.17 per cent in the previous year period.

Bhajanka said the unorganised sector had been paying lesser duty, and its products were at least 30 per cent lower (the duty component) than Century Ply’s.

With GST, the tax on plywood has been increased to 28 per cent, while that of laminates has been brought down to 18 per cent. “I do not see these smaller units operate at a 28 per cent tax now,” he added.

Stricter compliance under the new indirect tax regime is expected to help organised players push their offerings at the cost of the unorganised sector. Issues like inter-State supplies and introduction of way bills for truck movement are expected to force the unorganised sector to come under the compliance net.

“By H2 of FY18, we are expecting better numbers. Stricter enforcement of rules and improvement in the real estate sector should be helpful,” Bhajanka maintained.

Capex plans

Meanwhile, Century Ply will look at a 50 per cent increase in its laminate making capacity at a cost of ₹60 crore this fiscal. Its Kolkata facility produces around 4,50,000 sheets a month from four production lines.

This apart, the company has invested in its Guwahati unit that already has gone on-stream. Another ₹350 crore (out of ₹400 crore) has also gone into its Punjab medium density fibreboard unit. Commercial production at this unit is expected to stabilise in a few months.

Published on August 03, 2017

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