Economy

Paper mills’ performance: As TNPL, Ballarpur slip, peers improve Q1 profits

R Balaji Chennai | Updated on February 11, 2018 Published on August 18, 2017

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Major paper companies have had a good first quarter, backed by peak season demand from the education segment, which contributed to higher production and sales. Margins have been good on stable raw material pricing and absence of a significant cost push.

A senior executive in a South-based mill said raw material prices, particularly that of pulp wood, have been constant and units with captive pulping capability have benefited. There has not been a major cost push during the quarter, which is also the peak demand period as most orders for notebooks, text books and paper from schools and colleges are met in this quarter.

Also, Ballarpur Industries, the largest producer in the domestic market, has been inconsistent with its supply due to a financial crunch. But exact estimates of the shortfall are not available, according to industry sources.

Tamil Nadu Newsprint and Papers Ltd (TNPL) was hit by an acute water shortage in the State and had to shut down one of its paper machines. The production loss during the quarter, according to the company, was about 43,000 tonnes of paper and about 24,000 tonnes of packaging board.

The reduced presence of the two large players helped their peers.

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Seshasayee Paper, also in Tamil Nadu, managed to weather the water crunch better, and more or less conserved its profit.

Manish Gupta, Director, Crisil Ratings, told BusinessLine that in contrast to subdued growth in demand for printing and writing paper globally, pegged at less than 1 per cent, domestic demand is growing at about 5 per cent. This is likely to sustain for the next five years. Prices have been buoyant at about ₹57,000 a tonne, which is 6-7 per cent higher than in the previous year.

Printing and writing paper accounts for nearly one-third of the total estimated demand of about 15 million tonnes, said Saurabh Bangur, President, Indian Paper Mills Association. Despite the initial disruption in paper supply chain ahead of GST launch, the new tax regime will give a hand up for printing and writing paper, he said.

Copier paper — which is growing at 10-12 per cent — will particularly see a positive impact as most documents that truckers have to carry will be on A4 sheets, Bangur said.

West Coast Paper, of which Bangur is the Vice-Chairman, tripled its net profit in the first quarter and is targeting the mass market segment in copier paper.

JK Paper’s net profit doubled over that of the comparable quarter. The company’s President AS Mehta said the control on raw material costs achieved over the past three-four years by sourcing pulp wood from own areas, efficiency improvements in fibre, power and productivity, and a product mix focussed on premium copier paper and value added products contributed to better net sales realisations.

Published on August 18, 2017
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