Companies

Century Plyboards ropes in Boston Consulting Group for a second time

Abishek Law | | Updated on: Jul 01, 2021

Keshav Bhajanka, Executive Director, Century Plyboards

Aims to shore-up revenue in the laminates vertical

Century Plyboards has roped in consultancy firm, Boston Consulting Group (BCG) as it looks to shore-up revenue in the laminates vertical.

This is the second time that Century Ply is engaging with the BCG. Earlier, the consultancy firm was roped-in to bring better operational efficiency and cost management.

The Phase–I of the project saw the firm work on cost reduction, throughput enhancement which led to opportunities of savings in MDF (medium density fibreboard) division followed by logistics, power, and procurement. Overall BCG has helped the company to identify possibilities of annualised savings to the tune of ₹30 crore.

According to Keshav Bhajanka, Executive Director, Century Plyboards, work on the second phase of the project is expected to start from July onwards and the engagement is for a year .

“In the first phase, BCG worked on the cost side and we are expecting annualised savings of ₹30 crore plus. In the second phase, it is on the laminates side that they will work on enhancing production, cost reduction and increasing sales/turnover of the vertical,” he told BusinessLine.

In laminates, Bhajanka says, the company is not close to capacity utilisation yet.

Also read: Century Plyboards to focus on Rs 650 crore cap-ex plan

“I think there is more scope and the engagement with BCG will enable us to unlock further capacities in the existing lines. But definitely, by next year onwards, we will be looking to expand our laminates capacity as well,” he added.

Although the laminates had an EBITDA of 23 per cent in Q4FY21 (January-March), this was primarily due to a one-time benefit of low raw material costs. Sources say, the margins should be anywhere between 16 and 18 per cent.

Expansion plans

According to Bhajanka, the company has zeroed-in on Andhra Pradesh for setting-up a Greenfield MDF unit at a cost of ₹500 crore. Funding will be mostly through a mix of internal accruals and debt. Internal cash generation continues to be strong and to the tune of ₹300 crore approximately. The unit is expected to be operational by the Q4 of FY23.

“We may take some bridge funding, if required,” he added.

This apart, Century Ply also plans to make operational its ₹200 crore MDF unit at Hoshairpur (Punjab) by Q1 of FY23 (May-July).

In plyboard, the company was able to ramp up capacity very quickly post the pandemic to 100 per cent plus. Numerous exercises to add balancing equipment in the number of plants were taken up and this gave the company “10 per cent to or a little higher in further capacity”. A new unit is also being mulled.

Also read: ‘Anti-subsidy duty’ on fibreboard coming

“We are looking at close to 35 per cent to 40 per cent the last year’s expansion in plywood with the new unit, and the balancing equipment being added in the existing units. In laminates there is headroom and I think we can expand by 15 to 20 per cent easily in the current infrastructure,” he said, during an analyst concall.

Business outlook

As re-opening happens after the second-wave–induced regional lockdowns, the upcountry and rural markets are expected to drive up demand on the back of a good monsoon, higher MSP and improve cash flow due to government doles.

Century Ply is also upping the game in its mass segment brand, Sainik.

“With Sainik, we are at around 30 per cent of our overall revenues. We are hoping that this coming year, growth in Sainik will be higher; while Century our mass-premium to premium brand will continue to grow with new value-adds to it. We are bullish on growth in H2FY22 and plywood is expected to grow in doubling digits in both volume and value,” Bhajanka added.

Price hikes, which may come again in July, are unlikely to impact recovery.

Earlier price hikes were in the range of 3-5 per cent for plywood, 10 per cent each for MDF and laminates.

Published on July 01, 2021
COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you