As demand improves in the post-Covid era, Century Plyboards is looking at a Rs 650 crore cap-ex plan, its largest in recent times, over the next two years.
The company will add a greenfield plant, an MDF (medium density fiberboard) unit in South India at an estimated cost of Rs 450 crore. The unit is expected to be operational by FY23. Details of the State where the unit would come up and its capacity are yet to be finalised.
The other aspect is with regards to the brownfield expansion. The company is ramping up capacities at its MDF plant at Hoshiarpur in Punjab by 67 per cent (from 600 cubic meters per day to 1000 cubic meters per day) at an estimated cost of Rs 200 crore. Commercial production will start in the next 12 months.
According to Keshav Bhajanka, Executive Director, Century Ply, nearly 80 per cent of capex will be funded through internal accruals; whereas 20 per cent would be through debt,
“We are focusing on the South. Right now transportation cost is a major issue if we are to move offerings from north India units to down south. The new unit will have a positive impact on our bottom-line,” he told BusinessLine .
At present, the company’s plywood and laminate units are operating at over 90 per cent capacities; while MDF unit(s) is at 100 per cent. The particle board unit is operating at 110 per cent capacity. Some improvements in the particle board units were made recently, the benefits of which are expected to be visible in Q4 results of Century Ply.
Outlook
Meanwhile, the company is confident of maintaining EBIDTA margins (earnings before interest, depreciation, tax and amortisation) between 16 and 18 per cent going forward. Demand scenario has improved and volumes are going up. Century Ply has also gained market share.
While the unorganised sector continues to be under pressure, the recent inclusion of ‘ViroKill’ - a virus killing technology – across all its offerings have had a positive impact. The company also recorded more sales figures than they did in the regular market, indicating salience for the brand. New projects have also begun and demand is expected to improve further.
“Volumes are going to go up. And if we can maintain the volumes up, then this EBITDA will actually stay. We have taken too many efforts in the market, whether it is go-to-market or advertising. Plant ramp ups and outsourcing pacts (for some mass market brands) are happening,” Bhajanka said.
“We are very bullish on the future. But as I said before, we are committing double digit plus growth. The aspiration would be to do better,” he said during a recent earnings call.
Century Ply has already hikes the prices across categories like plywood and laminates, MDF and particle board on the back of increased raw material costs – timber and chemicals – as well as higher shipping and freight charges. Hikes vary between 2 per cent to 10 per cent (depending on categories).
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