Sanjay Agarwal, MD & CEO of Century Ply is hopeful of sustaining EBITDA margins at current levels of around 16 percent for two years on back of reduced raw material costs.
Sanjay Agarwal, MD & CEO of Century Ply in an interview to CNBC-TV18 shared more details about the company’s second quarter performance and the outlook going forward.
He is hopeful of sustaining EBITDA margins at current levels of around 16 percent for two years on back of reduced raw material costs. “Raw material costs controlled on account of operations in Myanmar,” he said.
However, the demand scenario still remains tepid and even though the company took some price increases, it is not helping their topline, said Agarwal.
Among their two businesses – plywood and lamination, the second is growing well because basically it is a relatively new business for them and as of now they are still catching up with the larger players. Meanwhile plywood has already reached a certain level and it is tough to see it grow in a big way, he added.
Below is the verbatim transcript of Sanjay Agarwal’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: There has been a healthy expansion in your EBITDA margins to 16.7 percent this time around on account of lower raw material cost. Can you tell us whether this margin performance is sustainable in the second half of the year?
A: I have earlier also declared that we have put up our raw material plants in Myanmar and in Laos and they have banned export of logs. So because of our fast initiation into these raw material areas, actually our raw material cost has fallen. The kind of raw material which we used to import for USD 500 is now costing us maybe 50-60 percent of that price there and then the logistic cost and the export duties are there.
So, at least it is sustainable for some time to come, maybe a year or two or two and a half years something like that, this differentiation will still be there because the others who reach there, to put up their plants, it is going to take a long time, to get the licensing, to set up the logistics.
Latha: It is a tepid topline growth, what is the sense you are getting of the second half? Is demand robust but because the prices have not risen that is the why the topline is not gung-ho or is demand itself a problem?
A: The demand itself is a problem. You will find that in the second half (H2) last year we were not doing so well and this year in the beginning one or two months we were not doing so well. After that we have really fastened or tightened our belts and we are trying much harder in the market.
However, the demand in the market is really bad and the bigger difficulty is cash. I can sell more but then I will be risking my outstanding in the market. If you will see that since about last three to six months, we have really increased our prices by about 3.5-4 percent and that is actually helping us.
Sonia: Between the plywood and the laminates business, where are you seeing demand crunch down more and do you expect to see single digit growth in both these businesses even in the second half?
A: In laminate we are growing well because in laminate till last year we were not a very big player. We were actually catching up, we had started few years back and our competitors are much larger than us. We have now in last six to one year time, you can see that we have made much bigger and much better progress.
As far as Plywood is concerned, we have reached a level where it is very tough to grow in a very big way but what we are doing is now we are getting into other price segments and other kinds of plywood where suppose plywood which doesn’t not have any instability of dimensions, absolute clear dimensions, absolutely perfect so these are kind of new plywoods we are trying to bring into the country. They will certain help us. We are getting into other materials which are replacing plywood. So we are getting into areas which replace our own products. So, we decided that somebody else will replace it so why don’t we do it ourselves. So, that is how we are expecting some growth in times to come. Otherwise the market is very bad.
Latha: What do you think you might do in terms of a bottomline growth in this year and maybe you have a visibility next year?
A: I think where we have reached to go up further I don’t think is possible. We can maintain for this some time.