In a year marked with disruption, Emami Paper emerged as a strong entity by demonstrating its true mettle through its performance.
The financial year under review was one of the most challenging. Realities were marked by GST-induced de-stocking among downstream customers, sluggish demand following the impact of demonetization.
I am pleased to report that in such a scenario, Emami Paper validated its spirit of differentiation by reporting a growth of 15% in revenues and a 7% growth in profit before depreciation and tax.
The expansion of our new paper board manufacturing unit commissioned in 2015 has been validated through some of the best operating parameters in the Indian paper board industry. The Company was able to stabilize the quality of the manufactured products at shortest period. The strong brand equity of Emami Paper enjoys a premium in realizations and category leadership. The Company enjoys an attractive position across product segments, enabling it to capitalize every upturn with speed and readiness.
At Emami Paper, we have embarked on the most dynamic phase of our existence - the Company not only intends to sweat its existing paperboard capacity higher than ever during the current financial year but also intends to embark on commissioning a 200,000 TPA Greenfield paperboard plant to go on stream in Gujarat in 2020.
We believe that this expansion will kick-start a new phase of growth for Emami Paper, resulting in the ability to deliver products quicker across markets and leverage our brand more effectively to translate into faster growth.
The result is that whatever we have achieved over the last two years, we expect to more than replicate the same in the next three years, enhancing value for our stakeholders.
Emami Paper stands at a decisive point in its existence.
The Company reported 15% growth in revenue corresponded by a 7% increase in its PBDT during the year under review, setting the foundation for improved revenues and surplus from 2018-19 onwards.
The future is compelling for another reason. It took the Company 35 years to reach RS,1367 crore of turnover during the year ending 31st March, 2018; the Company is attractively placed to more than double turnover in the next four years.
This dramatic projected growth (as opposed to incremental) will be the result of the Company''s decision to substantially increase its packaging board production capacity at a Greenfield location in Gujarat.
Culture of outperformance
The expansion represents a validation of the success of the Company''s boards unit at Balasore in the face of a number of challenges. When the Company commissioned this plant in April 2015, the general opinion was that it would struggle in this business given its inexperience; besides, the unit was considered distant from downstream consuming companies; the business warranted a completely different mindset from the paper and newsprint business that the Company had been engaged in.
I am pleased to report that Emami Paper''s boards business is being perceived as one of the most remarkable successes within its sector. The Company transformed every single challenge into an opportunity.
When customers were unsure whether we would be able to match the prevailing delivery schedules within the sector, we bettered it. When industry observers wondered whether we would be able to generate adequate throughput from our plant, we reported one of the shortest learning curves. When customers wondered how we would service their growing needs after we had touched rated capacity utilization in the first year, we proceeded to sweat our assets far in excess of rated capacity to emerge as a sectoral benchmark. When most wondered how we would be able to compete with some of the larger players within our sector, we surprised with our outperformance to emerge as the undisputed number two in size across the country''s boards sector and the number one in quality across a number of board varieties. When most customers wondered whether we would be able to stabilize our quality, we engineered our product and established leadership in the recycled boards segment.
Taking our success ahead
The time has come to replicate this Balasore-driven success in a second location. The Company intends to commission 200,000 TPA boards capacity in a Gujarat location with a mandate to commission commercial production in late 2020-21.
The expansion addresses the growing demand for high-end packaging boards in India - the market for virgin boards growing at a compounded 10% per annum and the market for recycled boards is growing at 7% per annum. Besides, the expansion will reinforce the business model of our boards business in various ways.
One, it will reduce the risk of the Company operating from a single location.
Two, the unit will strengthen our pan-India access, making it possible for us to deliver to customers within declining turnaround times.
Three, the expansion will make it possible for the Company to be future-ready in servicing growing customer appetites.
Four, investment in the large capacity will leverage the ability we have established in managing India''s largest single-unit boards plant at Balasore.
Five, the unit will be flexible enough to work with recycled or virgin raw material.
It is this optimism that we present, convinced that the Company''s performance in the last financial year was a foundation, that our performance in the current financial year will be substantially better, that our prospective cash flows will be reinvested in the fastest growing segment of our business and that the result of this will be a large virtuous cycle that promises profitable growth and sustainability across the foreseeable future.
At Emami Paper, not all innovations are generated out of emergency.
There is a concerted effort in working on projects concurrent with the Company''s every-day working. Projects that have not been announced. Projects that have not been cleared. Projects that are not even considered to be needed. Projects driven not as much by corporate agenda as much by private calling.
For instance, two engineers associated with the board mill recognized that even as the operational controls of the plant were largely automated, engineers were still required to continuously monitor all controls - a seeming contradiction.
That is when the engineers began to work on correcting this reality. Through a project launched and addressed in their private time.
They comprehended the logic. They wrote code. They did a dry run. They presented to the plant management.
The result is that this initiative, extending beyond the normal call of duty, is now an integral feature of the Company''s board plant.
Making it possible for the plant to automatically correct small operational deviations without human intervention.