Management's Insight
Dear Shareholders
FY 2020-21 was a year of new norms new customer expectations and needs and a new workenvironment creating experience defying challenges. As an organisation we not onlyadapted ourselves to the new reality but also stayed on track in the pursuit of ourlong-term strategic objectives that would keep our growth sustainable by meeting thechallenges head on.
Not in the living memory has humankind passed through as challenging a year as 2020-21.The Covid-19 pandemic broke out during the Q3 of 2019-20 and continues to wreak havocacross the globe by mutating into new strains and claiming millions as its victim. Itground the global market wheels and the socio-economic disaster that has followed in itswake will take years to mend.
With the devastation sparing none the fact that our industry would also be hit is a nobrainer. The paper and paper board industry faced headwinds in the form of a slidingdemand for writing & printing grade of paper and a crippled logistic chain thathobbled input supplies and customer reach-outs. The turnover of your Company declinedby~20%. However it was a credit to the Company and the strategy it had followed that itsprofitability stayed protected. It grew~34% over the previous year. The protectedprofitability testifies the intrinsic robustness of our business model that makes it cycleneutral.
Responding to the Call of the Nation
Living through normal times one tended to forget that your Company makes products thatare critical in packaging designated essential commodities. The black swan thatthis pandemic was made us rise to the occasion and respond to the call of the Nation. It'stime to remember that like all others we were also forced to suspend operations due to thepandemic. But when the time came and we were allowed to reopen to cater to the needs ofseveral downstream industries whose products are "essential in nature" wequickly responded by being one of the first to be off the blocks.
We were able to swim through this pandemic due to the vision and far sightedness of themanagement. Our focus on resilience agility and adaptability helped us tide over theprevailing raw material crisis and a subdued demand for certain grades of paper. Postunlocking through aggressive marketing and sales strategies of our value-added productbasket and with an enthusiastic staff working round the clock we managed to stem theimpact of the pandemic.
Key challenges and counter measures
The financial year 2020-21 witnessed a sharp increase in the input costs along withsliding demand in certain sections of papers. The extent of decline and the abruptnesscould have tested the viability of any Company. We are pleased to report that your Companyresponded with speed to the new reality. We deepened our focus on value-added productswhere the demand was less erratic and on products that enjoyed superior returns.
You would be happy to note that while scaling up on a steady note we have also beenconsistently strengthening our balance sheet. Our efforts towards rationalising debthelped in deleveraging the balance sheet. It also helped us in reporting an improvedfinancial matrix. During the year our total borrowings went down by Rs 183.48 crores. Wealso managed to slash our finance cost by Rs 22.09 crores.
In a bid to widen and strengthen our footprint and to ensure continued service to ourinternational customers our teams were active in our key international markets likeBangladesh Vietnam Middle East Thailand and Sri Lanka.
We have always placed great emphasis on Research and Innovation and investing resourceson it. Our R&D initiatives have emerged as the harvesting ground for product andprocess innovation while raising efficiencies at our manufacturing units. We have deeplyingrained sustainability as our strategic pillar and have laid great emphasis on ourEnvironmental Social and Governance (ESG) practices. Guided by the sharp acumen of ourBoard we are working tirelessly towards implementing these strategic pillars withoutstraying from our sustainability policy. We diligently follow TPM with an objective toachieve zero defects zero breakdowns zero pollution and zero loss. We always try toensure the highest standards of corporate governance in all our actions. As we move aheadour focus on sustainability and ESG remains unwavering.
Sectoral outlook
India is one of the fastest growing economies globally and the Government of India isdetermined to make it a five trillion economy by 2025. The projected growth in the economyis expected to boost the disposable income and that in turn would raise consumptionparticularly in FMCG and other consumable products e-commerce industry branded productspackaging sealable paper packaging bags. Growth in consumable products would drive theconsumption of paper required in packaging. With the growth in the consumption of paperconcern is now focussed on sustainable manufacturing practices.
As you are aware we have always kept sustainability as our major operational drivingplank. So it's no longer a challenge for us. We are ahead in the race in this regard.
At Emami Papers "Reduce reuse and recycle" is the mantrathat drives us. We have taken proactive measures to reduce the amount ofconsumables and resources that we use in our production line. This has resulted in lesspollution less energy usage and less wastage thereby minimising the impact ofmanufactured materials on the environment.
With increasing awareness environment protection has become an issue of globalattention. To make their products sustainable global corporations are using more recycledpackaging materials in their product line and various brands have set different timelinesfor replacing the virgin stuff with recycled material. Further with enhanced focus onsustainability by the manufacturers and growing consumer preference premium is likely tobe commanded by recycled products over the virgin one.
The pandemic has inspired deeper scrutiny of environmental health. Your Company is notan exception in this regard. We have initiated steps to reuse existing productionlines to manufacture value-added products. Along with this various integration measureshave also been initiated to achieve full capacity utilisation with minimal impact on thenatural resources. It has also strengthened our perception that a cleaner world willinevitably strengthen collective immunities and well-being. We must not forget that thispandemic has largely been blamed on the eroding environment and we at Emami have takenit seriously. Driven by this realisation we have tuned our existing production practicesand have laid focus on copier segment kraft paper segment recycled paper-board segmentand maplitho grade writing and printing paper.
However challenges are also there in terms of raw material security at competitiveprices free trade agreements resulting in cheaper imports without safeguarding theinterests of domestic manufacturers an increased focus on digitisation especially sincethe onset of Covid-19 pandemic capital intensive nature of the industry and easyavailability of plastic in the packaging industry. These challenges may hit the domesticpaper and paper board sector adversely in the short term but we are bracing ourselves toabsorb the impact while keeping the interests of the stake holders intact.
Spreading smiles
At Emami Paper we align our business priorities with social commitments as part of oursustainability initiatives.
Our Company views its human resources as its most valuable asset. Nurturing anempowering organizational culture the Company encourages its employees to deliver qualityperformance. The Company believes that the ability to deliver value to its customersdepends essentially on its ability to attract and retain skilled & trained manpower.
We also nurture a sensitive concern for the community. We are committed to invest incommunity development and the environment around us thereby benefiting the society atlarge. Our community initiatives include health awareness camps eradicating hungermaintaining safe plant operations environment consciousness and social infrastructureamongst many.
Optimism
Being a paper manufacturer with sizeable manufacturing capacities enriched productportfolio strong marketing and sourcing network a strong balance sheet and reducedrepayment obligations we are uniquely positioned to deal with the most alarming issues ofthe day and take our share of pie in long term sectoral growth barring some short-termheat waves which may come across due to challenges mentioned above.
We are thankful to all our stakeholders for their unstinting support. We remainmotivated to build a sustainable long-term future and add significant value for allacross the coming years.
With best regards
Aditya V. Agarwal Executive Chairman
Manish Goenka Whole-time Director
