Seshasayee Paper Q2 FY26 profit plummets 28%

Seshasayee Paper and Boards reported a sharp decline in its standalone financial performance for the second quarter of fiscal year 2026 (Q2 FY26). The company’s profit after tax (PAT) for the quarter fell by 28.25% year-over-year to INR 17.80-crore. Concurrently, revenue from operations (RFO) for the quarter dropped to INR 346.25-crore from INR 398.4-crore in the same period last year.

The full impact of market pressures was reflected in the half-year results (H1 FY26), where PAT plunged by nearly 45% to INR 34.86-crore, down from INR 63.12-crore in H1 FY25. The primary reasons cited for the lower net profit were lower average realisations per tonne of paper, a significant drop in export sales volumes, particularly to the US market, and an increase in the cost of wood, a key input material.

The export market proved particularly challenging, with total sales volumes declining by 3.1% in the first half of the year. Exports were hit hardest, recording a steep 55.6% decline. This was directly attributed to the suspension of exports to the US from June to September 2025 following the imposition of steep tariffs by the US government. The fallout from this trade disruption saw the company's Tirunelveli unit operate at only 76% of its capacity during the six months.

Domestically, the paper market remained sluggish due to poor orders. SPB highlighted disruptions caused by the GST 2.0 reforms announced in Q2, where the Goods and Services Tax (GST) on paper increased from 12% to 18%. This change was noted to have adversely affected overall market sentiments and order inflow. Furthermore, the company reported that the tax structure made imported paper for notebook conversion significantly cheaper with NIL GST or NIL GST ITC reversal, thus allowing continued availability of foreign paper at lower prices and creating pricing pressures in the market.

Despite the stressed market, SPB is proceeding with its long-term strategy, though it has restricted its investment plan for the Mill Development Plan-IV (MDP-IV). The project cost for MDP-IV Phase-1 at Unit: Erode has been reduced from INR 350-crore to INR 270-crore (net of GST ITC). The project aims to increase paper and bleached pulp production and enhance energy efficiency. The company also invested INR 26-crore during the quarter into a special purpose vehicle (SPV) to develop a 52.8 MWp solar and nine MW wind power capacity, with power expected to be available in Q1 of the next financial year.

Chairman N Gopalaratnam indicated that the market for paper, both in India and globally, will continue to be challenging in Q3, with recovery depending on global macroeconomic trends and swift closure of trade agreements for the US tariff situation. However, there is a silver lining, as wood prices have started showing signs of softening, which should help improve margins in the forthcoming quarters.