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Huhtamaki PPL Ltd.

BSE: 509820 Sector: Industrials
NSE: PAPERPROD ISIN Code: INE275B01026
BSE LIVE 14:49 | 15 Dec 355.00 -0.20
(-0.06%)
OPEN

360.00

HIGH

361.90

LOW

353.80

NSE 14:40 | 15 Dec 355.00 -0.45
(-0.13%)
OPEN

359.70

HIGH

363.00

LOW

352.20

OPEN 360.00
PREVIOUS CLOSE 355.20
VOLUME 8188
52-Week high 387.00
52-Week low 201.00
P/E 48.30
Mkt Cap.(Rs cr) 2,680
Buy Price 355.00
Buy Qty 100.00
Sell Price 355.10
Sell Qty 28.00
OPEN 360.00
CLOSE 355.20
VOLUME 8188
52-Week high 387.00
52-Week low 201.00
P/E 48.30
Mkt Cap.(Rs cr) 2,680
Buy Price 355.00
Buy Qty 100.00
Sell Price 355.10
Sell Qty 28.00

Huhtamaki PPL Ltd. (PAPERPROD) - Chairman Speech

Company chairman speech

THE PAPER PRODUCTS LIMITED ANNUAL REPORT 2008 CHAIRMAN'S REPORT MESSAGE FROM THE MANAGING DIRECTOR & CEO The global financial crisis, and, the consequent credit crunch and sharp slow down in India's economic growth is well known. Our own business experienced a series of completely unexpected events through 2008 making our environment unusually turbulent and uncertain at the time. How did we perform and how did these events impact 2008 Net External Sales revenues grew 15% to Rs.6121 mn, Cash flow at Rs.650 mn was good, and debt equity ratio strengthened to an even more solid 0.2:1 from 0.27:1 at end 2007. However, PBT dropped by 12% to Rs.298 mn and EPS dropped to Rs.3.4 from Rs.4.53 the previous year. So, in adverse circumstances where cash became very scarce in the economy, we acted to make our finances even stronger, and, achieved reasonable sales growth. However, bottom line was stillimpacted. Why? We look at three unexpected events 1. Foreign exchange loss in 2008 of Rs.132 mn. We had hedged a substantial portion of forecasted 2008 foreign currency inflows from export sales. This decision was taken after steep appreciation in the Rupee in 2007 hit margins on export sales, and after recognizing a consensus amongst experts on further appreciation in the Rupee. Completely unexpectedly, the Rupee actually depreciated by over 25%. However, to be competitive our export sales prices had to be adjusted partially in line with the Rupee depreciation. The consequent forex loss of Rs.132 mn included a book loss of Rs.40 mn from mark to market valuation. We have learned from these experiences and have a new forex strategy going forward. 2. Sudden surge in raw material prices, more than anticipated. In line with the global surge in crude oil, petrochemicals and general commodities, by mid-year some key raw materials jumped 40% in price while the average for raw material inflation was near 20%. Consequently, in Q3 our value added margins reduced by 2.5% compared with the first half of the year, impacting PET in Q3 by an estimated Rs.41 mn, and with some carry over impact into Q4 also. 3. Sales drop in Q4 as the credit crisis caused major inventory reductions at all points in the supply chain from consumer goods manufacturer to retailer. Till Q3, i.e. for the first 9 months of the year our sales grew in line with our internal expectations of over 20% growth. However, Q4 sales were flat compared to previous year but were sequentially 130/ lower than Q3 of 2008. There was much more to the picture in 2008. We faced steep inflation in operating costs driven by cost hikes in power, fuel, services, and salaries & wages due to general high inflation. The overall turbulence described earlier created anxieties and pressures amongst business partners e.g. customers became much more demanding on price and service. Through this period, we increased focus on cost efficiency and business excellence programs mentioned last year including the Six Sigma initiative. As a resultant, in 2008 we reduced our total operating expenses in the P&L by 1.1 % of sales. We pushed on innovation and our NASP (New Applications, Structures, Products and Processes) program, and 29% of 2008 sales were from NASP products. Cash Flow was a priority with reductions in Inventory and Debtors by 8-9% achieved compared to previous year. The circumstances demanded a tight control on capital expenditure to essentials. Still, with an eye to the future we kept work going on the Thana Plant reconstruction, with start-up beginning in phases from end 2008; and, on the company wide ERP project planned to go live in Q3 2009. The company has a sound tradition of upholding in its actions the highest standards of Corporate Governance. Still, we believe there is always room for improvement, hence work continued in 2008 towards strengthening Governance processes. We go forward into 2009 with care and confidence. On the one hand, the economic environment is clearly uncertain and we have poor visibility. However, there are positives. The Indian economy will grow, albeit at a slower pace in the short to mid term. And, the Indian consumer's aspirations will not be denied. There is enough anecdotal evidence that demand for the products we package is growing, and, we are increasing the product range steadily. The inventory correction leading to the drop in sales momentum in Q4 of 2008 has carried over to the start of 2009, but this is inevitably short term and should play itself out within the first quarter of the year. And, looking at opportunities outside of India, our exports grew 18% in US$ terms in 2008 and we can look forward to building on this in 2009. Actions being taken within the Flexibles Global business of Huhtamaki group to obtain increased global synergies will support the company's export efforts, and also, innovation efforts in products and processes. The uncertain times need us even more to satisfy our customers through competitiveness, reliable service and innovation. We need to continue expanding our product applications and customer base, improving our cost efficiency and conserving cash. 2009 will see us working under an overall guideline formula of focus on 3Cs + 2Cs: 'Customer, Cost, Cash, backed y, Creativity and Cohesiveness'. A key objective is for the people of PPL to become a thoroughly competent, lean and cohesive team, which is positive, human, creative and fast moving capable of overcoming any adversities with efficiency and effectiveness. And, for the company to be fully 'mission ready' to exploit growth opportunities as they will irmevitably present themselves. We look forward to meeting the challenges and the opportunities. I take this opportunity to warmly thank our People, our Shareholders, Customers, Suppliers, Business Associates, our Board of Directors, and our Huhtamaki group colleagues for their efforts, kind support and encouragement. Suresh Gupta Managing Director & CEO The Paper Products Ltd., India. March 2009