Price hike likely in Oct; Q2 better than Q1: Century Ply

Continuing with its focus on ‘Inside Kolkata Week’, CNBC-TV18 spoke to Sanjay Agarwal, MD & CEO, Century Plyboard to know more about the ground realities of doing business in West Bengal.Talking about his company’s performance, Agarwal said second quarter of the fiscal is likely to be better than the first quarter but could not commit on 17 percent revenue growth for FY16.Performance in Q1 of FY15 was exceptional but Q3 and Q4 were subdued so the company has now renewed its focus to catch up on growth going forward.Price increases would likely happen around October 1, he said. He said if the new product plant in Chennai was a success, they would look at putting up a similar plant in the North.The capacity utilisation for FY15 stood at 80-85, he said.Below is the transcript of Sanjay Agarwal’s interview with Latha Venkatesh and Ekta Batra on CNBC-TV18.Latha: Can you take us through what has happened between your first quarter results and now. The first quarter was a little bit of a shocker and that explained why the markets started taking profit in your counter. You saw revenues actually growing by only two percent against a very good 17 percent that you gave us in the previous year. In the second quarter, did you see things picking up at all?A: Our company cannot be much different from what the economy is. So, the first quarter, we all know just two percent and I have given the reason for this, that last year in the first quarter we had done very well, so really to grow too much on that was actually difficult and the economy is really also not doing so well. So, the second quarter is doing okay. It is better. We are now finding that we have to improve our production facilities, production capacities again, means whatever lull or little slow or relaxed will attitude we had taken is now changing. And I believe that the second quarter will be certainly better than the first. The third and the fourth quarter of last year was little slow. So, this year, to grow on the last year’s third quarter and the fourth quarter will be much easier for us. And we have done that and so we had taken a little bit of a relaxed attitude that yes, we are doing very well. So now the alertness has come back and we are trying everything possible in the market. So, I am sure that the third and fourth quarter will be really much better and we will catch up to our growth in this year.Latha: It is people like you who have a much better finger on the pulse of the market; it is good that you say that things are slightly picking up in the second quarter because our fear from a very arm chair level was that the poor monsoon would have smothered or softened demand. You do not see any such fears in the rural market?A: Very frankly, the market is not still very good. But, because we had taken a little bit of a relaxed attitude in the first quarter since we were doing well and now we have become very alert and we have all the resources available to us. So, with this present attitude, we are able to make a better push in the market. But the markets per se, I cannot say that they are good, they are actually not good. There is no pull.Ekta: So, have you had to cut prices at all and this is also in context of the kind of pressure you might be facing from the unorganised sector?A: The unorganised sector is not doing so well at the moment. But our raw material prices have gone down. So, for us the markets will be good and it is good right now. As far as the price increase is concerned, we had taken a price increase from September 15, which now actually we have to postpone to October 1. So, that price increase, if we are able to take, and my people on the field are able to handle it then that is a good sign in this kind of a circumstance.Latha: What about margins? You did very well on margins like most companies did in the first quarter, you saw a five percentage point improvement in your margins to 18 percent. You will be able to do better or at least as well?A: I have told this earlier also, that whatever margins we are getting are actually very good. In the kind of industry we are in, we should not expect this to continue. But, I think in the present circumstances because the raw material prices are still down, and the prices of petroleum goods have been arrested. So, all these things will actually keep our bottom line okay for the time being.However, it all depends on how the whole thing moves because we are actually riding on our raw material prices. The price increase is not really very high - only three percent, four percent is actually.Ekta: You have some capacity expansion which you are looking at in Chennai, would that be for the laminates business or considering that that one in fact outperformed and hence maybe you would like to increase your revenue share within that front?A: That Chennai thing is completely a different new product. It is a particle board plant which is about 200 cubic metre or 175 cubic metre per day. This plant we are putting up for the first time in Chennai. We do not have particle board inside our company. Presently we are buying little bit from outside and we are laminating it and selling little bit in small quantities. Now we are putting up this medium sized plant and if it is successful, maybe we will put up another one somewhere in the North because this item is very freight sensitive, so we cannot service the North of the country from South. So, maybe we will put up one more in the North later on. But, right now this is a new product coming up, a new investment.Latha: What about your overall capital expenditure (Capex)? You said you are producing to capacity and so you would be spending more on capital expansion? What is the Capex number you have in mind?A: You know that most of our Capex plants have been completed. We have completed our Myanmar expansion also. So, the present expansion is going only in Laos and that is still on. Two units have been started and one unit is going to start and you know that we have taken a total investment of about USD 10 million there. So, all of them will be completed by this year-end or financial year-end. Latha: What is the capacity utilisation in India? A: Last year, it was near to about 80 percent plus and because we had expanded our capacity in Kandla and we had expanded some of our capacity in our Southern plant and in Guwahati plant also. So, whatever the market expansion will happen we will be able to take care of with this capacity.Latha: Finally just one question. You did 17 percent revenue growth last year, will this year be at least as good?A: Looking at the first quarter, I cannot say that yes, we will be able to do 17 percent, but we are really trying very hard. But cannot give an exact number as of now.