After having seen a better consumption for FY15, Orient Paper is targeting for better EBIDTA margins this year.In an interview to CNBC-TV18, ML Pachisia, MD of Orient Paper, said that he is certain that the company would turn profitable in FY16.Despite the selling price of paper being under pressure, Pachisa strongly believes that the company would see growth as cost prices would fall down soon. He said that high raw material costs and soaring coal prices lead to company’s losses last year.Though the company has seen growth in the electrical business for the fourth quarter in FY15, Pachisa said that he has no plans of quitting the paper business.
Below is the edited transcript of ML Pachisia’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18. Anuj: If you could tell us what happened in the quarter because your topline was flat, the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) margin performance was flat and the net profit actually came down?A: For the quarter, nothing great happened except that we have had some electrical business doing well. Paper has also done better than before, however there have been some cost increases but overall we are quite happy with the performance in the last quarter and are looking forward to better times. Ekta: Can you elaborate a little more in terms of what took place on the papers division in terms of maybe the raw material costs that you had to bear on the EBITDA level and when do you think you might turn into the black in terms of your paper business in particular?A: Last year we were hit by a very high increases in the raw material cost as well as in the coal cost. Coal prices also in the auction were very high because of the shortage of coal with Coal India.
We see some easening of costs in both the material and the coal. So, the last months of March and April, there has been a substantial cost reduction in the prices, otherwise our own efficiencies and consumptions have been far better than before.
So, we are looking forward to the cost coming down. Of course the selling prices of paper are under pressure, that is unlikely to go up in the short-term but we do believe that the cost will come down. At the moment there is excess availability, therefore prices have in fact come down rather than going up.
Anuj: What is the outlook for FY16? In FY15 you reported a net loss and your EBITDA also came down, for FY16 what kind of numbers do you think you could report?A: We are certainly planning positive bottom line, we think that we are well on our way to achieving that, however we will have to see how things go. If the costs continue at the present level, we see no reason why we should not be able to report a positive outcome.
Ekta: Is there a chance that you could possibly look at maybe divesting your paper business in order to concentrate on your consumer durables business which though reported a low revenue, it has managed to actually improve its EBITDA margins? A: That is correct. The electric business is doing reasonably well and is expected to do better, we just started another project which is in the electric business, that is switch gear which has just started in April so we are looking forward to much better results from April in the electrical business. As far as your question about divesting from paper, at the moment there is no such proposal.
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