Paper sales improve, demand picks up

Improved market conditions helped improve sales and profitability of paper mills in the December quarter with expectations of a sharp increase in demand ahead of the new academic year.

06 Mar 2019 | By PrintWeek India

During this period, market leader JK Paper posted a 72% jump in December quarter profit to Rs 120.26-crore this year, compared to Rs 69.81-crore in the corresponding quarter last year.

International Paper and West Coast Paper reported 179.16% and 57.28% growth in their December quarter profit. Tamil Nadu Newsprint (TNPL) reported 17.4% and 83.36% jump in its December quarter sales and net profit respectively.

During the quarter, the paper mills raised their prices and cut their cost concurrently, which helped improve profit margins. The positive sentiment is likely to continue in coming quarters, as paper mills see room for a price increase of certain grades.

TNPL reported 6% increase in its paper production at 113,526-tonnes during October–December 2018 quarter compared to 106,558-tonnes in the corresponding quarter last year. The company’s packaging board output also surged to 47,489-tonnes for October-December quarter 2018 versus 43588-tonne for the same quarter last year.

During the December quarter, domestic paper mills benefitted from the stagnant raw material prices. Industry sources said the average wood pulp prices remained unchanged at USD 875/ tonne.

Speaking to reporters, Rohit Pandit, secretary general, Indian Paper Manufacturers Association (IPMA), said, “Indian paper mills face stiff competition from imports. During the last few months, India’s paper import has moderated, which helped domestic companies to boost their sales throughout the period between April and December.

Meanwhile, specialty paper manufacturer Yash Papers Ltd plans to invest Rs 200 crore to expand its production capacity by 30% to 150 tonnes per day. It is also doubling its manufacturing capacity to 20-tonnes from the existing 10-tonnes. The commercial production on these plants with expanded capacity is set to begin in March 2020.

According to a report, India’s share in global demand is growing as domestic market increases. The domestic demand of paper and paper products grew from 9.3 million tonnes in FY 08 to 17.1 million tonnes in FY 18 at a compounded annual growth rate (CAGR) of 6.3%. The domestic per capital consumption is little over 13 kg, below the global average of 57 kg.

25% decline in import in first three quarters of FY19

India’s import of paper and paperboard declined by 25% in the first nine months of the current financial year due to the diversion of export consignments to China from surplus countries, including South Korea and the members of the Association of Southeast Asian Nations.

According to the data compiled by the Directorate General of Commercial Intelligence and Statistics (DGCI&S), under the Ministry of Commerce, India’s total import of paper and paperboard was 1.1-million tonnes for the period between April and December 2018, as against 1.47-million tonnes in the corresponding period last year.

Meanwhile, the government early this year levied USD 850/ tonne of import price, which further restricted dumping from overseas.

Following these developments, paper mills raised paper and paperboard prices by 4% during the October-December 2018.

In value term, overall import of paper and paperboard has reported a decline by 20% in dollar terms, and 13.54% in rupee terms during the period between April and December 2018.

Waste paper import rises by 133%

In a bid to cut cost of paper production, Indian paper mills imported 133% more waste paper during the first half of the current financial year following a sharp increase in pulp prices.

According to the government data, India’s waste paper import was 3.5-million tonnes for the period between April and September 2018 compared to 1.5-million tonnes in the corresponding period last year. During the financial year 2017-18, India’s import of waste paper stood at 4-million tonnes as against 3.2-million tonnes in the previous year.

Geographical location of the mill often determines the type of raw material used for paper manufacturing. Most mills in the northern and western India use agricultural residues and recovered paper, while southern and eastern regions uses wood and bamboo as raw materials. More than 50% of the total paper produced from recovered paper is produced in western India due to availability of berthing space at ports to import raw materials. Recovered paper is mainly used for manufacturing newsprint, duplex and Kraft paper.

Meanwhile, waste paper prices declined by a staggering 16% to an average Rs 13.7/ kg in the first half of the current financial year from Rs 16.3/ kg in the same period previous year.

JK Paper’s Q3 net profit jumps 72% to Rs 120.26-crore

JK Paper has reported a 72.26% jump in standalone net profit to Rs 120.26-crore for the third quarter ended December 2018 on account of improved realisation, better operating parameters and reduced finance cost. The company posted a net profit of Rs 69.81-crore in the October-December quarter last year.

The total income during the quarter under review rose 10.94% to Rs 883.11-crore. It stood at Rs 796.01-crore in the December quarter of 2017-18, the company said in a BSE filing. The improved market conditions helped growth in sales realisation across the board, Harsha Pati Singhania, vice-chairman and MD, JK Paper said in the report.

According to AS Mehta, president and director, JK Paper, lower raw material cost plus price hike helped the company improve margins. “On top line growth, the volume is the same compared to the same period last year. It is the price improvement on product category that helped. Going forward, the next quarter may be slightly lower compared to this quarter because we are going to take a nine-day shutdown at our Odisha facility. This is a regular annual shutdown. Thereafter, from the first quarter of 2019-20, we will have the volume coming from our new Sirpur acquisition. So, there will be some volume increase. Additionally, the price increase will give some advantage for the next two, three quarters,” he said in an interview published in The Economic Times.

The company’s export turnover is around 7-8% of the total turnover. Since there is a robust demand in the domestic market, Mehta said the export volume will not increase further.

Meanwhile, in an interview with CNBC-TV18, Mehta said the paper prices in India are in tandem with global pulp and paper prices. He added that in the current quarter, copier paper prices are stable. However, coated paper prices are down globally and domestically by around 3-4%.

JK Paper has also announced that it expects the Sirpur Paper Mills facility in Telangana to add capacity by 1.4-lakh tonne from 1 April 2019. The company acquired the mill last year.

(Courtesy Agencies)