India’s current contribution of 2 per cent to global paper production presents an opportunity to paper makers in the country India's current contribution of 2 per cent to global paper production presents an opportunity to paper makers in the country. According to Research and Marketing Reports, the Indian paper industry is already growing at 5 per cent compared to the 3 per cent annual growth rate in the rest of the world. Other sources such as the IPP Star Industry Survey of the Indian Printing Industry project even higher growth rates for paper consumption in India.

The paper industry is witnessing structural changes, as major paper manufacturers plan and execute consolidation and restructuring measures. The strategies of the major Indian players and their financial performance in 2005–2006 are analyzed here.

JK Paper

JK Paper Ltd has reported an 8 per cent increase in its net profit at Rs 8.65 crore for the company's third quarter ending March 31 against Rs 8.01 crore in the corresponding period last year. The company's total income grew by 17.77 per cent to Rs 213.26 crore in the third quarter compared to Rs 181.08 crore in the corresponding quarter of the previous year. Harsh Pati Singhania, Managing Director, JK Paper Ltd, said to the financial press, “High operating efficiencies at plants, improved price realisation and reduction in interest cost have led to this improved performance. Demand growth continues to be strong.” JK Paper also announced that industrialist Arun Bharat Ram and financial expert Udayan Bose would join its board.

Orient Paper

Orient Paper & Industries Ltd, a G.P.–C.K. Birla Group company, with interests in cement, paper and electric fans, has reported a 24 per cent growth in sales for the fourth quarter ended March 31, 2006. The gross turnover jumped to about Rs 1,000 crore from Rs 860 crore in 2004–05. The company has also recorded a substantial increase in PBT (Profit Before Tax) for the fourth quarter at Rs 38 crore (Rs 1.5 crore). For the year ended March 31, 2006, the PBT was Rs 53.51 crore (Rs 4.21 crore).
Rama Newsprint

Rama Newsprint and Papers Ltd has come out with improved results for the quarter ended march 31, 2006 as its net sales increased 33 per cent to about Rs 87 crore from about Rs 66 crore in the corresponding quarter of the previous year.Profit before tax for the quarter under review is 7.14 crore against Rs 22.34 crore in the previous corresponding quarter, which includes a one time extra-ordinary income of Rs 25.22 crore due to restructuring of debts.

Better results for the quarter are attributed to lower power and fuel cost by Rs 57.27 crore, lower chemicals cost by Rs 1.18 crore and better net sales realisation by Rs. 3.05 crore, although the interest burden increased due to increase in the working capital. Net sales for the year ended March 2006, increased 12 per cent to Rs 321 crore from Rs 287 crore on a year-to-year basis.

For full year's working, there is a loss before taxation of Rs 5.42 crore against a profit before taxation of Rs 5.42 core against a profit before taxation of Rs 5.42 crore against a profit before taxation of Rs 34.19 crore the previous year which includes remission in principal loan amount for Rs 25.22 crore and interest write-back for Rs 21.42 crore on account of restructuring debts.

The company achieved production of 33,138 tons for the quarter and 1,23,109 tons for 12 months of the current year against 30,235 tons in the corresponding quarter and 1,18,092 tons in the corresponding 12 months of the previous year. A company press note said Rama Newsprint and Papers has been able to make ‘zero finished goods' inventory as on March 31, 2006.

Meanwhile, approvals for reduction in the company's share capital from Rs 231.63 crore to Rs 58.16 crore have been received form the equity share holders and the stock exchanges and petition with the Ahmedabad High Court was listed for hearing on April 7, 2006.

BILT

Ballarpur Industries Ltd in April 2006 reported 27 per cent increase in consolidated profit after tax for the third quarter ended March 2006, and announced a change at the top level that will see Chairman LM Thapar retiring in July. The company's profit after tax for the quarter under review stood at Rs 56.06 crore as against Rs 44.21 crore in the corresponding quarter in the previous financial year, an increase of 26.8 per cent. The consolidated revenue during the quarter stood at Rs 468.39 crore as against Rs 393.02 crore in the same period last year, up 19.18 per cent.

Announcing the change at the top management, BILT joint managing director RR Vederah said with effect from July this year, Thapar will step down and the present Vice-Chairman Gautam Thapar will take over as the new Chairman. He said, LM Thapar will become the Chairman Emeritus after he steps down as chairman.

The company is also preparing to get into new areas of lifestyle writing instruments, photo glossing paper and file boards to expand its business, advised Vederah, adding that BILT was currently in the process of due diligence for its proposed foray into lifestlye writing instruments.
He said that BILT will tie-up with another company for lifestyle writing instruments while it will outsource the photo glossing paper.

West Coast Paper

West Coast Paper Mills Ltd (WCPML) has retained the benefit of reduction in excise duty on paper and paper products from 16 per cent to 12 per cent ad valorem to compensate a portion of the cost escalation in raw material and fuel. The company said this while announcing its un-audited financial results for the year ended March 2006.

During the year under review, the company earned a net profit of Rs 42.73 crore on a turnover of about Rs 525 crore, when its total production touched around 1,76,000 tons of writing and printing paper, and duplex board. Of the total production, duplex board would be about 67,000 tons. Last year, it produced about 1,73,000 tons, including duplex board of the same quantity.
Although the net profit was 39 per cent higher than last year's net of Rs 30.66 crore, the net profit would have been far higher but for the higher cost of raw material and fuel and the shutdown of its turbine-II in April and May 2005. Apparently the company is actively considering revision of prices effective from June 2006 to neutralise the remaining portion of increases in production cost.

West Coast does not foresee any impact on its cost of production due to the recent increase in furnace oil rate. It expects that the impact will be lower now because of the restricted load on multi-fuel based power plants after the commissioning of the new turbine generating set.

Hind Paper

Hindustan Paper Corporation Ltd achieved a turnover of Rs 1,001 crore from its three units in Assam and Kerala — up from Rs 855 crore last year. The company recorded a profit before tax of Rs 100 crore (Rs 65 crore). With production touching 3, 20,113 tons for 2005–2006, the company was able to surpass its installed capacity of three lakh tons for the fourth year in succession. With the sale of 2.09 lakh tons of writing and printing paper and 1.13 lakh tons of newsprint, the company achieved 17 per cent growth in sales according to a press release. Hind Paper has set a sales target of 3.30 lakh tons of writing and printing paper with a sales turnover of Rs 1,177 crore for the current year with a profit before tax of Rs 150 crore.

AP Paper

Investment advisors have given a ‘buy' recommendation on Andhra Pradesh Paper Mills (AAPM) with a price target of Rs 224. APPM is already showing positive results of its on-going Rs 635 crore expansion program begun in Q1of FY05. The expansion will enable the company to double its EBTIA margins to around 26.2 per cent in FY08. It is expected that a good increase in margins will result in a CAGR growth of 38 per cent in profit after tax from FY05 to FY08. Sales growth of 15.2 per cent, improved return ratios on capital employed of 14.7 per cent, and return on equity of 15.1 per cent are expected in this period.

Mysore Paper Mills

Mysore Paper Mills has reported a decline in net profits for the third quarter ending March 2006. During the quarter, the company experienced a 9.21 per cent fall in profits from Rs. 22.25 crore to Rs. 20.2 crore. Sales for the quarter rose 11.57 per cent to Rs 98.13 crore compared with the corresponding quarter, a year ago. Total income dipped –2.56 per cent to Rs. 124.19 crore, with other income falling –34.03 per cent to Rs. 26.06 crore compared with the quarter, a year ago.

Operating margins improved to 1.96 per cent during the quarter, a rise of 1407.71 basis points compared with the corresponding quarter. Net Margins, on the other hand, fell from 17.46 per cent to 16.27 per cent during the quarter. Excluding extraordinary income (expense), the net margin is estimated to be at per cent. The company`s earnings per share on a trailing 12 month basis is Rs. –0.38.

Tamil Nadu Newsprint & Papers Ltd (TNPL)

Unaudited results for the quarter ended March 31, 2006

The company has posted 41 per cent rise in its net profit to Rs 34.6 crore for the fourth quarter ended March 31, 2006 (Q4 FY 05–06) as compared to Rs 23.83 crore for the quarter ended March 31, 2005 (Q4 FY 04–05). Total Income has increased from Rs 184.07 crore in Q4 FY 04–05 to Rs 221.07 crore for Q4 FY 05–06.

Audited results for the year ended March 31, 2006

The company`s profit increased by 112.25 per cent to Rs 80.55 crore for the year ended March 31, 2006 (FY 05–06) as compared to Rs 37.95 crore for the year ended March 31, 2005 (FY 04–05). Total Income has increased from Rs 668.22 crore in FY 04–05 to Rs 801.41 crore for FY 05–06.

The Board of Directors has recommended the final dividend of 15 per cent for the financial year 2005–06. Along with the interim dividend of 15 per cent already paid, the total dividend for the year is 30 per cent.