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Oct 17, 2016 06:49 PM IST | Source: CNBC-TV18

Upbeat on tissue paper biz; to reduce costs further:Orient Paper

Reduction in internal costs and operational efficiencies aided profitability in the second quarter, further aided by stable demand said ML Pachisia MD, Orient Paper & Industries.

ML Pachisia, MD, Orient Paper and Industries in an interview to CNBC-TV18 spoke about the factors that led to the good set of numbers in the second quarter ended September 30.

For the quarter ended September 30, the company reported a net profit at Rs 2.8 crore versus loss of Rs 26.2 crore for the same period in the earlier fiscal. The total income too was up 9.4 percent at Rs 405.6 crore versus Rs 370.7 crore same quarter earlier fiscal. The year on year EBITDA stood at Rs 20.8 crore versus and EBITDA loss of Rs 6.5 crore

According to Pachisia, reduction in internal costs and operational efficiencies aided profitability in the quarter gone by further aided by stable demand. Going forward too, they aim to reduce costs, he said.

The company is into making writing, printing and tissue papers. The tissue paper is a high margin business and so the company plans to expand the business. So far, most of the tissue produced is exported, said Pachisia.

Below is the verbatim transcript of ML Pachisia's interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: This is indeed very good numbers a turnaround for your stock from an EBITDA loss of Rs 6.50 crore to an EBITDA profit of Rs 21 crore. Can you tell us what has gone so right?

A: There are factors related to markets, but in our case most of the turnaround has happened because of internal cost reduction and efficiency improvements that we have been able to bring about. Our costs have come down; of course market demand has been fairly stable. We are expecting further cost reduction because of certain actions that we have taken. The new tissue project is also likely to get commissioned shortly. So, all these factors have contributed to the turnaround in the paper business.

Latha: Your packaging freight forwarding charges have fallen as also your consumption of raw material. The big fall is in consumption of raw material. Which specific raw material? And will that advantage accrue over the year, the second half?

A: The raw material cost for the paper has come down for two reasons. One, the cost of procurement of pulp fruit is lower than previous years because of our own farm forestry efforts. We have been planting a large of number of trees, which are now maturing and so we are able to get larger quantity from nearby areas. Number, two, our raw material is improved because of actions which we took in terms of upgrading the plant with small investments, little bit small investments. So, both these factors, reduction in the cost of procurement as well as improvement in the efficiencies has contributed to raw material cost coming down.

Sonia: I wanted to talk bout your topline because your topline has also grown almost 10 percent to Rs 405 crore. What was the volume growth this time and what could be a sustainable volume growth going ahead?

A: In the paper business, our volume is grown by almost 25 percent during the quarter. Pricing is only about Rs 500 per tonne more than last year same quarter so volume growth is there as well as the efficiency improvements are there.

Latha: About crafts paper and other kinds of paper, can you give us the split and where the margins are higher?

A: We don’t make craft paper so I will not be able to comment on craft paper. We make tissue paper and writing and printing paper. For tissue paper we have major business in export. Tissue paper is certainly much more with higher contribution than the writing and printing paper and that is why we are expanding tissue paper.

Sonia: You recently demerged the consumer electric business as well into a separate company. When do you plan to list that company?

A: The listing will happen. It is a long process of getting court approvals and Sebi approvals and everything else. So, I cannot be precise but what we are saying in our plan for demerger, our policy demerger that it will be effective March 1 2017. When that will come through and therefore how long it will take for listing, it is a long process and it might take up to a year from now. However, whenever that happens the effective date will March 1, 2017.

Q: Can you leave us with some guidance as to what may be the year-end revenue growth as well on EBITDA you will surely end in the black right?

A: We will surely end in the black. I am not in a position to give you any specific numbers but certainly we will be ending in black.

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