Clean paper mills make better profits

IPMA estimates India's printing paper market at 4.6 mn tonnes in 2015-16 with annual growth of 5%

Writing and printing paper mills have seen a sharp increase in their top and bottom lines over the last six quarters. Seshasayee Paper posted a nearly 10-fold increase in its net profit to Rs 39.54 crore in the March quarter and West Coast Paper posted a two-and-a-half times jump. Profits of International Paper, JK Paper and Tamil Nadu Newsprint also increased, but at a slower pace. Their income is up significantly.

A number of small and medium size mills have shut down over the past six quarters due to stringent environmental laws. Mills are required to make large capital investments in clean technology, which the smaller ones could not afford.

“Around 20 per cent of India’s writing and printing paper mills have shut down. This has benefited the larger players,” said V Kumaraswamy, chief financial officer, JK Paper.

 

The Indian Paper Manufacturers’ Association (IPMA) estimates India’s writing and printing paper market at 4.6 million tonnes in 2015-16, growing at 5 per cent annually.

A report by rating agency CRISIL said firm prices and falling costs following investments in efficiency improvement were bolstering profitability in this sector. CRISIL studied 71 paper mills, which account for nearly half of sales, and said improved cash flows would help reduce their aggregate net debt by Rs 1,800 crore. 

Writing and printing paper prices have jumped by 6-7 per cent to trade currently at Rs 57,000 per metric tonne.

“We expect the industry to hold on to its healthy operating margins and generate an operating profit of around Rs 11,000 per tonne of paper produced per annum over the next two years. The improved cash generation is expected to lead to a decline in net debt levels by 25-30 per cent,” said Subodh Rai, senior director, CRISIL.