Shobhan Mittal, Joint MD, Greenply Industries, discusses company's performance for the fourth quarter and future outlook.
Greenply Industries revenues are expected to grow 10-12 percent this year Shobhan Mittal, Joint MD, told CNBC-TV18.
He said margins were under pressure as raw material costs increased following the ban on timber imports from Burma.
Realisations per cubic metre declined because the product mix included lower category products in the company's economical portfolio, he said.
To boost margins this year, Greenply will improve the quality of plywood and build an efficient dealer network, Mittal said.
Below is the edited transcript of Shobhan Mittal’s interview with Mangalam Maloo and Ekta Batra on CNBC-TV18.
Mangalam: I was looking through your numbers; I understand that your mainstay business which is the plywood business, the margins on that have fallen on account of lower capacity utilisations. Could you give us a sense of what exactly happened this quarter?
A: Yes, the plywood margins have fallen due to challenging conditions. Also, we have had some shifting on raw material costs because of banning of import of timber from Burma.
So, we have taken up action on improving plywood quality and increasing the dealer network which we hope will result in improved margins in the coming financial year.
Ekta: How would that maybe translate into some segmental growth that you could provide us with going into the next fiscal? How much in terms of total income growth, what do you envisage in your segments?
A: Overall as a company which combines plywood and medium density fibreboard (MDF) sales and with the addition of new products like decorative veneer coming into our portfolio this financial year, we are looking at anywhere between 11-12 percent overall revenue growth.
Mangalam: Your medium density fibreboard (MDF) segment really outperformed despite seeing any growth on the quarter. Any particular reason for that and also the realisations on that came down?
A: The MDF performance overall has been better because we had some help with plywood segment pricing going up again due to strain on raw material costs. So, we were able to enter that plywood segment to a certain extent and replace that with MDF.
Realisations have gone down because we introduced lower category products in our product portfolio where we were offering economical products as a part of the product portfolio.
So, per cubic metre realisations on those products are lower. So, although we improved our earnings before interest, tax, depreciation and amortization (EBITDA) margins, we improved our overall capacity utilisations but realisations per unit have remained flattish because of a product mix which included economical products.
Ekta: The last time you had spoken to us you had mentioned that the natural veneer segment would contribute maybe Rs 30-35 crore going into FY16. Would you still stick by that assessment and how much would it be in terms of a parentage of revenues? Why are you wanting it to grow, how much would you like it to grow to?
A: Greenply has historically been a player in the national veneer business however with the demerger of our decorative business last year; the natural product portfolio has become a part of Greenlam. So, because the plywood products are sold, it is a complimentary product veneers, that is why we estimate Rs 30-35 crore sale coming in this year and we would like to stick by that number but as a percentage of overall revenue, this would be a fairly small amount.The Great Diwali Discount!
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