Kolkata-based Century Plyboards is looking at an improved show in the second half of this fiscal.
With the fall in the rupee and rising crude prices, the raw material cost of the company had gone up, which in turn dented the sales and margins of the plywood maker in the first two quarters of FY19.
Log, one of the prime imports of the company, accounts for approximately 15 per cent of the turnover.
However, recent developments like the rupee recovering some of its lost ground, falling crude prices and the rise in the price of laminates and plywood are expected to boost the company’s fortunes.
According to Keshav Bhajanka, Executive Director, the effect of hike in prices would be visible from the third quarter (December quarter).
For the quarter ended September 30, 2018, Century Ply saw a 19 per cent jump in revenues, year on year, to ₹564 crore. However, the net profit dipped five per cent year on year to ₹38 crore.
Price hikes
Compared to the same period last fiscal, the company’s net profit margin and operating profit margins came down to 6.70 per cent in Q2FY19 (8.46 per cent) and to 10.58 per cent (14.07 per cent), respectively. “Yes, margins have been under pressure. But, the volume growth in Q2FY18 was over 10 per cent. It is encouraging,” Bhajanka told BusinessLine, adding that “price hikes have been initiated in certain segments”. For instance, in the laminate category, an eight per cent price rise was effected in three phases – the first two to the extent of 2.5 per cent each; and the last, initiated in November, for three per cent.
In the plywood category, the last price hike of 2-2.5 per cent was initiated in July.
Raw materials used in plywood making, such as phenol, are crude oil derivatives. So a northward movement in crude oil prices obviously impacted costs. Phenol formaldehyde resins are used as wood adhesives.
“However, post the price hikes and stability in the market (in terms of crude oil price movement and rupee depreciation), we expect the margins to improve,” said Bhajanka. “We are expecting better performance in the third quarter and hopeful of achieving a 12-per cent EBIDTA margin this fiscal. The MDF (medium-density fibre) division has already started gaining,” he added.
Bhajanka further added that the company was also hoping for stricter enforcement of e-way bills to stave off competition from low-priced and unorganised players.
In H1 FY18 (April to September), Century Ply reported a forex loss of ₹26 crore. Bhajanka, however, maintains that the company has already hedged itself.
The company has a dollar-denominated debt of $30 million. While a part of this is covered, there is an exposure of around $10 million (worth of debts), sources said. However, exports make up for this.