JK Paper on Thursday decided to hike the prices of its product by five percent on the back of rising input costs. AS Mehta, president of JK Paper says that the price increase was much-needed due to shooting wood costs, weak rupee, and surging coal costs. However, he also told CNBC-TV18 that there may be a need for another price hike soon to factor in the rupee’s freefall and other raw material costs.
He also sees stress on margins for the company for the current quarter.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Could you confirm if you have increased your product prices by 5 percent. Will it cover the rise in cost pressures?
A: The price increase is in the range of 4-5 percent on different product categories. It is effective this week. Its effect should be seen in the market in the first week of September. It will not offset the full impact of the cost pressure as it is much more.
When we contemplated this price increase, the dollar-rupee parity was around 62.60. It has already crossed 66-67/USD. We will have to do one more price increase immediately. Possibly we will have to watch the market for 15-20 days and then need to take a call on one more price increase.
Q: Will another price hike be in the vicinity of five percent? Will that be absorbed as there is competition in this space?
A: The demand, supply and capacity are fairly balanced. We need to keep the pricing keeping in mind the cost of the imported paper in some categories it is available. I need to keep the pricing at par with the imported one.
With rupee’s fall, the cost of imported paper has also gone up substantially. I don't think that should be a block in between.
Q: The increase in product prices lags the increase in your input prices. Does that mean that in the current quarter we are likely to see margin pressures?
A: I agree with you. There is a time gap and margin for the paper industry was under severe pressure in the last quarter too.
Q: Will there be any kind of impact on the volumes due to the hike? What are your expectations of revenues?
A: I don't foresee any major impact on the revenue as the market was anticipating the price increase because of the wood cost, rupee-dollar parity, and surging coal costs.