The robust demand outlook and rising consumerism bodes well for the Indian paper industry, which is expected to maintain its growth momentum in the near future. Whether the sector manages to grow above that would depend on how things pan out on the external front as well as the reform focus, considering that general elections are due in less than 12 months.
We were able to maintain a leadership in the copier segment and amongst the top two in coated paper space and a leading player in the packaging board area. We were also actively involved in market expansion outside India, exporting our products to over 50 countries.
The strengthening macro fundamentals coupled with enhanced digitisation and upbeat consumer sentiments are perfectly aligned with your Company’s thrust on high quality and valued-added products. Your Company is well poised to take the ‘front-seat’ of that growth drive. Your continued support over the years has given us strength and I look forward to the same as we endeavour to make the most of the opportunities on offer.
Your Company achieved gross sales of Rs 3,070 crore, the highest ever in its history, an EBITDA of Rs 639 crore, up 18.6% over the previous year. The PAT was Rs 260 crore as against Rs 163 crore last year, representing an increase of 60%. While the Indian paper industry has been growing at about 6-7%, there has been a sharp escalation in imports at a CAGR of 16-17% over the last 7-8 years. The surge in imports was unprecedented from the FTA countries, mainly ASEAN, where there was more than a 6-fold jump due to zero import duties. India, which is one of the few pockets of growth amidst a less than robust growth scenario in the other emerging markets, China and ASEAN, became a prime destination for the surplus material from the ‘slowing markets’. However the recent steep increase in international pulp prices prevented cheaper materials from these countries to undercut domestic prices and set a cap on paper prices.
While domestic paper manufacturers have been able to raise prices, it was only to a limited extent. This was because most of our Asian competitors, by virtue of having a dedicated industrial plantation program, were able to report a significant advantage of lower raw material costs over domestic mills. It is therefore important to review our position in terms of FTAs as well as the various other constraints that render Indian industry less competitive. The recent weakness in the Rupee, down by almost 7% since the turn of the year, provided some cushion from the imports surge.
A combination of lowered debt, upgraded credit rating and efficient working capital management helped reduce finance costs complementing higher operating margins to result in increased PAT.
India’s economic growth is catalysing the prospects of the paper and paperboard sector; recent moves to reduce the use of plastic could further provide an impetus to paper and board applications.
The management team at JK Paper Limited is pleased to report a record performance in 2017-18. That this record performance transpired in a challenging year has made this performance even more creditable. The Company reported its highest-ever gross sales of Rs 3,070 crore, best-ever profit after tax of Rs 260 crore and highest (in recent years) EBIDTA margin of 22.2%. In a capital-intensive business that encountered a number of headwinds, the Company reported profitable growth wherein the percentage growth in the Company’s bottomline was higher than the percentage growth in revenues for three successive years. The result was an overall improvement in business health, reflected in an increase in return on capital employed from 11.1% to 14.9%. In the last quarter of the financial year under review, the Company had reported profit growth of 31% compared to the corresponding quarter in the previous year. This indicates that the improvement in the Company’s performance was derived from a sustained systemic improvement rather than fleeting opportunistic responses.
The investment phase of the Company’s existence (starting from the time it commissioned a new plant in 2013) is over; it is at an inflection point of a more exciting chapter in its existence.
At JK Paper, the story of how we transitioned from a challenging post- expansion juncture into one of the country’s most profitable paper companies has been a story of spirit, empowerment and teamworking. More than anything, it has been a story of how we believed we could be a leader and how this sense of self- esteem translated into an everyday culture manifested in whatever we did.
In the capital-intensive business where a high capacity utilisation was always a priority as it would help us amortise fixed costs better, we sweated our assets efficiently, focused on consistent cost moderation, strengthened operating efficiencies to generate a higher output from the given quantity of raw material and reduced energy consumption per tonne of paper produced. And just when critics felt that the growth story was over after we had touched rated output, we attempted the lateral: we outsourced production, supervised outsourced quality and marketed products under our own brand, opening up a completely new dimension to our growth programme.
We are optimistic of our long-term prospects for a number of reasons. Even as India is considered to be a major market for paper, the reality is that the country’s per capita consumption is low at 13 kgs compared with the global consumption average of 57 kgs. That the country is extensively under-served when it comes to paper is evident: India accounts for nearly a sixth of the global population but consumes one-25th of the world’s paper. We believe that the correction of this under- consumption is already in progress. India is possibly the fastest-growing large paper- consuming nation in percentage terms. The country’s growing literacy – from 64.84% all-India for both genders in 2001 (census) to 74.04% in 2011 (census) – represents a curve that should touch the consumption inflection point across the foreseeable future.
The Company offers a range of office papers (economy to premium grades) including photocopying and multipurpose papers used in desktop, inkjet and laser printers, fax machines and multifunctional devices. The premium water-marked paper varieties manufactured by the Company also address the incipient needs of corporates and students.
The Company maintained its sectoral leadership in coated paper through the identification of new downstream segments, customised solutions, on-time delivery and after-sales service. Consequently, JK Cote continues to be a a popular choice among discerning customers. The Company has an installed capacity of 54,000 metric tonnes per annum to address growing customer needs. The complement of prudent outsourcing made it possible for the Company to offer a wider range of products.