Seshasayee Paper: MDP-IV will consist of augmenting pulp production which will help in replacing costly pulp both in current Tirunelveli unit and Servalakshmi unit

Seshasayee Paper: MDP-IV will consist of augmenting pulp production which will help in replacing costly pulp both in current Tirunelveli unit and Servalakshmi unit

-Paper Machine (at Servalakshmi Paper Limited) will be suitably structured to produce quality Printing and Writing Papers for both Domestic and Export markets
- SPBL’s profit after tax stood at INR 386 crores in the FY 22-23 as against Rs 103 crores in the previous year.
- The Export market for Uncoated Wood Free grades has been under pressure both in terms of demand and prices over the last 6 months and this trend is expected to continue.

The Pulp and Paper Times | August 2023:

Demand for Paper, particularly in Printing and Writing segment, remained firm throughout the FY 2022-23. Demand for Boards, Packaging segment, which was firm in H-1 witnessed severe demand pressures and realisation drops in H2. However, prices remained firm and continued to increase without any pressures in the printing and writing segment, in which our company largely operates Most of the major pulp and paper manufacturers in India, including our company, have registered record levels of operational and financial performance in FY 2022-23.

Amidst to this, Seshasayee Paper and Boards Limited (SPBL) registers record performance in FY 2022-23 thanks to the favourable market conditions and the realisation of benefits from project MDP-III in Unit - Erode. In the 1st full year post project completion, the company had registered key landmarks in production, sales, income and profits, which are the highest in the annuals of the SPBL’s history.

SPBL’s profit after tax stood at INR 386 crores in the FY 22-23 as against Rs 103 crores in the previous year.

With the successful completion of project MDP-III and with the acquisition of M/s. Servalakshmi Paper Limited, the company has identified the next round of strategic growth projects in further improving the sustainable competitive advantage by further augmentation of in-house pulp capacity.

Addressing the shareholders at 63rd AGM, Mr N Gopalaratnam, Chairman of SPBL says that recently, SPBL has acquired the assets of Servalakshmi Paper Limited, situate close to our existing Tirunelveli unit, in an e-auction on a Going Concern basis and is awaiting closure of liquidation formalities to commence the repair, refurbishment and upgradation of the Plant and Machinery for manufacture of about 75000 tonnes per annum of Fine Papers.

On the question of Servalakshmi acquisition, Mr Gopalaratman describes that it is a mill which has remained closed for more than 5 years. It also has some equipment missing. These has been some loss of electrical cables, copper etc. All these things should have to be attended to. Taking all these in to account, we have been careful with the amount that we have quoted. We pitched for about Rs.105 crores. That is the amount that we have paid for the auction. But, we may have spend much more to make it to produce 75000 tpa of quality papers. This will take a little bit of time. It will take several months before we assess the status and assess what is required to be done. I am sure that at the end of the day, we will be able to come up with a good project. We have a lot of experience in this field both in operations as well as engineering. All this will help us to come up with a good project, which will be profitable without undue time delays.

He further revealed that Servalakshmi Mill is adjacent (3 kms) to our Tirunelveli unit and has a Paper Machine and a deinking plant, in addition to 15 MW Power Plant, which will help in meeting part of the requirements of our existing Tirunelveli unit. Paper Machine will be suitably structured to produce quality Printing and Writing Papers for both Domestic and Export markets.

The Board of Directors of the Company, in their meeting held on April 29, 2023, has accorded in-principle approval for the company to secure Environmental Clearances for project Mill Development Plan-IV (MDP-IV) in Company’s manufacturing facility in Erode, to augment Paper Capacity from 1,65,000 tonnes p.a. to 2,31,000 tonnes p.a. and Pulp Capacity (Wood and Bagasse) from 1,80,000 tonnes p.a. to 2,52,000 tonnes p.a.

Phase-I of MDP-IV will consist of activities for enhancing the pulp capacity to 2.52 lakh tonnes p.a. in Unit : Erode with a marginal increase in paper capacity. The enhanced pulping capacity will help the company in replacing costlier purchased pulp (imported pulp / deinked pulp) and reduce the overall cost of manufacturing per tonne of Paper in Unit : Tirunelveli.

Mr Gopalaratman says, that our idea is to fund all these projects through internal resources. Phase-I of MDP-IV will consist of augmenting our pulp production. Augmenting our pulp production will help in replacing costly pulp both in current Tirunelveli unit and Servalakshmi unit, as and when it commences production. This project will help in reducing or eliminating use of imported pulp and therefore will give us a cost advantage. In Erode unit, this also gives us an opportunity to increase our Green Fuel. When we make more pulp, we also make more bio-fuel. It is a project which would involve high levels of Synergy among 3 mills. We want to bring a lot of Synergy among 3 units to maximise paper production as well as reduce costs. It will take some time for these to materialise. We have to first get the EC. As and when it is implemented, it will help the company as a whole.

“One of the major concerns is the huge import of paper taking place from China and Asean countries, especially in the printing and writing grades. This definitely has impacted the off take from domestic mills as well as the prices of these products. If this continues, it will definitely impact negatively the margins of domestic mills this year,” he said.

On the import of paper, Mr Gopalaratman added, “We have discussed this subject on couple of occasions with the government. They are serious about it and they are trying to see how to combat this. Hopefully some solution will emerge in the months to come. domestic demand has not come down. On the one hand, Government says that we want to encourage domestic manufacturing and on the other hand thro’ FTAs, they have allowed a lot of these imports to take place at Zero duties. That is a main problem.”

On the questions of what is the sense of normalised profitability in the medium term? Pricing is 30% higher than pre-covid, what are the key risks you see, Mr Gopalaratman explained that sharp fall in Pulp prices mean there will be a fall in prices of paper, as well outside of India. If Paper at these lower prices come in to India, it will definitely affect domestic prices. This will have significant impact on the profitability in the near term as well as medium term.

OPERATIONS 

Thanks to the favourable market conditions and the realisation of benefits from project MDP-III in Unit : Erode in the first full year post project completion, the Company had registered the following key landmarks during the FY 2022-23, which are the highest in the annals of the Company’s history.  -Annual production at 2,41,145 tonnes.
 -Annual sales at 2,40,649 tonnes.
 -Total Income at INR 2113.05 crores.
- PAT at INR 386.54 crores.

OUTLOOK : 

The market for Writing & Printing (W&P) Paper grades is expected to be stable in the first quarter of FY 2023-24. Despite increased availability of imported W&P products including Copiers at attractive prices, the higher requirements of papers for the ongoing notebook segment and major Government Tenders in various states is expected to sustain the order inflow in this segment in Q1 of FY 2023-24. Both Board segments and Kraft Paper are likely to face sluggish market conditions. 

The sustainability of the higher levels of demand will however depend on the Global macro-economic trends. With fear of possible recession in some of the key developed economies, prices of Paper is expected to see pressures in the medium term. 

The Export market for Uncoated Wood Free grades has been under pressure both in terms of demand and prices over the last 6 months and this trend is expected to continue.

TREE FARMING ACTIVITY 

The Company continues to provide quality Clonal Seedlings of Eucalyptus, as well as bare-rooted Casuarina Seedlings, at subsidised rates, to interested farmers and assist them with technical help to achieve higher yields. 

In addition, the Company had provided clones of Melia-Dubia, a high yielding fast growing species, suitable for Pulp production. 

Technical Support to the farmers for this initiative is being provided in association with the Department of Tree Breeding of Forest College and Research Institute, attached to Tamil Nadu Agricultural University, Coimbatore, under a Collaborative Research Project.

In accordance with the Company’s vision to achieve wood positive status, over twenty crore Seedlings (Clonal Eucalyptus Seedlings, bare-rooted Casuarina Seedlings and Melia Dubia Clones) were made available during the year, to farmers at subsidised rates for planting in about 22,502 acres of land. (Previous Year: 20,042 acres).
 

Web Title: Seshasayee Paper: MDP-IV will consist of augmenting pulp production which will help in replacing costly pulp both in current Tirunelveli unit and Servalakshmi unit