I am pleased to report that we have performed very well for the FY 2018. A year in which we achieved record levels for production, sales, revenue and profits.
Our products are made of fibre from sustainable forests, so sustaining forests is critical to our strategy. We have improved our plans to ensure long-term access to sustainable fibre by collaborating with farmers and government to develop strong plant species and advanced farming practices to grow sustainable forests for the long term.
The fifty four year old Company is an integrated paper and pulp manufacturer with a total production capacity of 241,000 TPA. The Company produces a range of premium grade writing, printing, copier and industrial papers for domestic and export markets. Each of these products offer a differentiated proposition and is targeted to meet unique needs of discerning customers.
4% Increase in product sales volume; 29% Increase in EBITDA during the year; 156% Increase in Profit after Tax on the back of higher sales, improved efficiency and manufacturing cost; 25% Improvement in net Cash flow.
IP APPM’s digitization of plantation data is picking up pace. As on FY18 we have digitized around 1,640 hectares of plantation. This process creates an environment of intense interaction with the farming community and builds a robust relationship of trust and confidence between the Company and the farmers. Through our online farm forestry initiative – rythukosam the farmers can interact online with the Company as well as access data about best farm forestry practices.
As at March 31, 2018 there are 250,000 hectares of forest area under IP APPM’s farm forestry initiatives benefiting 79,000 farmers
We offer a wide range of superior quality writing and printing papers suitable for printing journals, text books, reference books, calendars and a variety of other commercial printing applications as well as for notebooks and diaries.
The Company’s financial performance improved by earning its highest recorded EBITDA and PAT. These results were driven by higher sales volume, higher selling prices as well as record production levels and improved efficiency and manufacturing cost. India’s UFS market demand grew by ~4% in FY18. IP APPM grew 4% with the market, improving our supply positions for copier and high demand industrial grade
The Paper Industry in India is growing steadily with increasing demand from various customer segments like education, business & corporate and commercial printing. The demand and growth drivers have come from a combination of factors such as rising income levels, growing per capita expenditure, rapid urbanization, industrial production, government spending on education and increased school enrollments.
Fiber is the key raw material ingredient within our products, so long term access to low cost sustainable fiber is important to our strategy. We actively engage with farmers and other key stakeholders to collaborate on efforts to improve the strength of the seedlings and clones as well as enhanced farming techniques to improve yield. These efforts help to ensure the long term access to sustainable fiber. The strategy has also enabled the sourcing of 100% of the Company’s fiber requirement within a 300 km radius of the mill, while stabilizing the fiber cost in 2017-18. Our partnerships with farmers has enabled the planting of ~ 4.3 million high yielding Casuarina clones and ~ 70 million Casuarina seedlings. The plantations have covered ~ 10,250 hectares of farm land and generated ~5.1 million man-days of employment for farmers.
The domestic demand of paper and packing is ~14 Million metric tonnes, which accounts for ~4% of the world’s consumption. The estimated turnover of the industry is Rs. 50,000 crores, contributes Rs. 4,500 crores to the exchequer and provides employment to more than 0.5 Million people and 1.5 Million people indirectly.The Indian paper industry is highly fragmented with ~ 750 paper mills,of which ~6% have capacity of 50,000 MT and above.
The per capita consumption of paper in India is ~10 Kg as opposed to a global average of 56 kg. We believe India is in the early stages of the demand cycle and expect continued growth in all paper segments. As per the industry estimates, Printing and Writing segment demand is expected to grow at a CAGR of ~4%, Paperboard at a CAGR of ~9% and speciality paper at ~8%.
In 2011, The Andhra Pradesh Paper Mills Limited was acquired by International Paper (IP), a USD 22 billion American packaging, pulp and paper company founded in 1898. In the first significant domestic acquisition by a foreign paper company, IP bought 75% stake in the Company. IP, headquartered in Memphis, Tennessee, USA is the largest packaging, pulp and paper company in the world, with approximately 55,000 employees operating in 24 countries.
During the year, sales volume was 2,30,900 MT as compared to 2,20,900 MT in 2016-17. Of the revenues, 19% were from exports (previous year 20%) with domestic sales accounting for the balance 81%. IP APPM produced 2,28,900 MT of paper in the year ended March 2018 as against 2,15,700 MT in 2016-17. Capacity utilization remained above 95% during the year.
Debt was reduced from Rs. 360 crore in March 2017 to Rs. 208 crore in March 2018, with the result, the debt-equity ratio was lower at 0.37:1 Interest cost as a percentage of revenue came down significantly. The Company generated Rs. 215 crore cash from operations in the year under review as compared to Rs. 172 crore in 2016-17. The net profit for the year was Rs. 83.1 crore while the previous year had ended with a net profit of Rs. 32.4 crore.
The global pulp markets have tightened during 2017 and 2018 and prices have increased substantially. The pulp price increases have helped to push paper prices up around the globe and have influenced a shift in trade flows. The shift in trade flows has an impact on India and our main export markets of Africa and the Middle East. These changing dynamics occurred over a short period and it is hard to predict the direction of future trends. We are optimistic about the outlook for paper demand in India, but realize many factors can affect growth. The global influences are more difficult to predict. Therefore, we stay focused on the things that we control. We focus on safety, serving our customers, developing our people and improving our operations, cost and profits. We are optimistic about the outlook and confident that we can continue on the path to improve.
International Paper APPM Annual Report 2018