Century Plyboards arm acquires majority stake in Laos company

Abhishek Law Kolkata | Updated on January 09, 2018

Keshav Bhajanka, Executive Director, Century Plyboards,

To leverage the acquisition for plywood production

Century Ply (Singapore) Pte, a subsidiary of Century Plyboards, has acquired a majority (51 per cent) stake in Laos-based Huesoulin Wood Processing Factory.

Century Huesoulin Plywood Lao Co has now become a step-down subsidiary of Century Plyboards.

The move comes, as Century Plyboards looks to leverage the Laos unit for plywood production.

“Earlier the focus was on veneer and plywoods. Now, the stress will be more on plywood and the lower cost of production (as compared to India) should benefit us,” Keshav Bhajanka, Executive Director, Century Plyboards, told BusinessLine.

According to him, cost of production in Laos is at least 20 per cent lower than that of India. This will add to the company’s bottomline. Laos accounts for about 10 per cent of Century Plyboards’ total production.

Dip in profit

In July-September quarter of the current fiscal Century Plyboards saw an 18 per cent decline in net profit to ₹40 crore. Net profit in the year-ago-period was at ₹49 crore. Net revenues stood at ₹475 crore during the quarter under review. This is the second straight quarter in whichthe company has witnessed a slip in net profit. Net profit in Q1 had seen a 20 per cent dip year-on-year.

Profits dipped primarily on account of forex losses and an increase in raw material costs. Raw material constraint at its Guwahati unit was also a reason for the decline.

However, on a sequential basis, EBIDTA margins (of total income) improved to 15.7 per cent in the September quarter, compared to 14 per cent in the June quarter. Margins improved on account of a hike in product prices.

Plywood prices moved up by 10 per cent across the eastern States and in Madhya Pradesh to offset the low VAT rates prevailing there. At the national level, plywood prices moved up by 1 per cent, post GST, sources said. While all four verticals of Century Plyboards — laminates, medium density fibre boards, particle boards and container freight station services — reported profits in Q2, the particle board and laminates segments saw the highest year-on-year growth.

According to Bhajanka, the company expects a better show with its ₹350-crore medium density fibreboard unit at Hosiarpur going on stream from October. Higher margins in MDF are expected to contribute towards its bottomline.

Sources say Century Ply is expecting ₹150 crore revenue from its MDF unit in H2, while another ₹400 crore is expected next fiscal from the segment.

Introduction of e-way bills by March next, will further help the company take on unorganised players as cost of compliance for the latter is likely to move up.

Published on October 31, 2017

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