Over the last few years the Indian real estate sector encountered sluggish demandwhich reflected in lower apartment handovers and a slower off take of interiorinfrastructure products. As demand declined most interior infrastructure companies beganto reduce sticker prices in the hope of carving away a larger market share. In doing so anumber of interior infrastructure companies eroded their margins.
Sticking to our principles
At Centuryply we were faced with a challenging decision during the year under review.On the one hand a number of industry observers advised us to reduce prices and playthe market or vacate our hard-fought industry-leading market share.
The management took a considered decision that even as we would be responding to ashort-term battle through the desperate reduction in sticker prices we would in effectbe losing a long-term war. This rationale was based on our understanding that consumerswho had brought from us at higher sticker prices in the past would have felt cheated andthe trade surprised that we had selected to reduce prices would have advised a number oftheir customers to hold back on their purchases n the hope that he would reduce pricesfurther. I am pleased to state that our decision to resist temptation paid offattractively. Even as a number of our competitors were keen to moderate prices in the hopethat they would be able to generate a superior price-value proposition Centuryplyachieved the opposite: it continued to emphasise its product superiority how our brandswould pay off in the long-term and how even though consumers would need to pay marginallyhigher for our brands for the moment they would stand to benefit across the long-termthrough product durability.
The strategy paid off. As the year progressed what surprised us at Centuryply was theevolving maturity of the Indian consumer. Some consumers down-traded; they selected to buylower-priced products. But most Indian consumers continued to trust a credible organisedbrand like Centuryply; they continue to believe that it made eminent sense that whenbuilding (or rebuilding) ones home a modest premium represented a reasonableinsurance against product under-de livery.
The result then is reflected n our numbers.
Our sales grew by 6% our EBIDTA grew by 8% and profit after tax by 11% over FY2014-15.
These numbers did not just represent profitable growth; they were also the highest inour existence.
Strengthening our brands
At Centuryply we selected to strengthen our business n a challenging year. Weproactively strength ened our brands through enhanced visibility positioning andpromotion. We did so because we believe that the proposed Goods & Services Tax whenintroduced will strengthen the traction for organised ply wood and related brands inIndia. As a future-facing decision our conviction was showcased in the performance of ourSainik brand. The Sainik brand s a tough product that epitomises the spirit of the soldierready for hardship. It enjoys a strong foothold in the economy value seg ment. It isavailable across markets within India with a competitive price tag. It is the mosteconomical purchase in its category. It is termite and borer-resist ant all-weatherresistant and boiling water-resistant. t also has the ability to withstand heavy loads. Besides it is one of the sturdiest plywoods by virtue of hardwood as its core. The companyinvested in this brand with dedicated television commercial.
The result: Sainik volumes witnessed a phenomenal ncrease.
Growing our business
During the course of the year under review we strengthened our business by expandingour product portfolio. We ventured into new segments commissioning a particle board unitin Chennai to access raw material (timber waste) from several units in the vicinity andcapitalise on the fact that there are no similar units in the city. We introducedwood-plastic composite panels test-marketed under the Zykron brand name. We marketed ourlaminated doors portfolio aggressively leading to robust growth. We grew our laminatesbusiness by around 15% on the back of a strong catalogue and distribution network.
The Company thoughts subsidiary is setting up a unit in Laos to secure our growingraw material appetite. The Company entered into purchase arrangements with several localentities in Laos for the purchase of face veneers thereby reducing raw material costs andenhancing transportation e3ciency.
We embarked on the process to manufacture MDF one of the most popular panel productsacross the world with a large scope. Following the commissioning of this unit we willpossess a capacity to manufacture 198000 cubicmetres per annum graduating it to one ofthe largest in the country.
The Company foresees a demand turnaround for panel products following the CentralGovernments Housing for all by 2022 programme as well as the interestrate subvention scheme for economically-disadvantaged classes related to home owner ship.The RBI announced interest rates cuts that helped ease home loan rates and catalyse mortgage prospects The proposed implementation of GST will address the complexities andinefficiencies of the existing indirect tax framework through a robust technologyplatform. We believe that this will provide a level playing field between organised andunorgan sed players. Besides the GST will also address the problem of double taxation andthe cascading impact of regional tax disparities while rendering inter-state basedtransactions tax-neutral.
The test of any company lies in its performance across its most challeng ing period.
The last year was ours. Having passed this test credibly we are advantageously placedto grow our business when the overall business climate turns favourable. We are placed atan attractive cusp; we believe that the 2016 monsoon will be favourable in comes willrebound and consumer spending will increase.
Coupled with the tax reforms that we expect we believe that our best is just round thecorner. Regards