Ballarpur Industries (BILT) held a conference call post announcing its results for the quarter ended December 2008. B Hariharan Group Director Finance addressed the call and discussed the performance of the company.
Highlights of the concall
During the December ended quarter, the net sales of the company on consolidated basis has decreased by 7% to Rs 646.31 crore while net profit has declined by 38% to Rs 45.91 crore.
For the half year ended December 08, the net sales of the company on consolidated basis has increased by 5% to Rs 1418.13 crore while net profit has declined by 23% to Rs 113.25 crore.
During the December ended quarter, the net sales of the company on standalone basis has increased by 14% to Rs 253.98 crore while net profit has inclined by 162% to Rs 31.87crore.
For the half year ended December 08, the net sales of the company on standalone basis has increased by 12% to Rs 501.48 crore while net profit has inclined by 132% to Rs 60.24 crore.
On consolidated basis for the December quarter, total paper sales volumes were down by over 9% to 1,36,516 MT as compared to 1,50,735 MT in the corresponding period last year. Revenues from sale of paper were up by 4% to Rs 545.9 crore from Rs 525.5 crore in the corresponding period last year. The Paper products sales revenue were up by 20% to Rs 76.3 crore from Rs 63.6 crore in the corresponding period last year. Total Pulp sales volumes were down by 58% to 9,842 MT as compared to 23,382 MT in the corresponding period last year. Revenues from sale of pulp were down by 67% to Rs 29.8 crore from Rs 91.4 crore in the corresponding period last year.
For half-year period on consolidated basis, total paper sales volumes were down by 3% to 285176 MT as compared to 294866 MT in the corresponding period last year. Revenues from sale of paper were up by 9% to Rs1134.9 crore from Rs 1039.6 crore in the corresponding period last year. The Paper products sales revenue were up by 23% to Rs 149.3 crore from Rs 121.1 crore in the corresponding period last year. Total Pulp sales volumes were down by 26% to 32926 MT as compared to 44693 MT in the corresponding period last year. Revenues from sale of pulp were down by 28% to Rs 119.9 crore from Rs 166.7 crore in the corresponding period last year.
There was no price reduction in month of January, but if required, the company can cut its paper prices in month of February or March due to import from China.
On the cost side, there has been significant drop especially in the pulp prices. The pulp prices currently hover around USD 400 per MT as against USD 750 per MT for the previous quarter. The full impact of the same will realized from March 2009 onwards.
The capacity expansion in Unit Bhigwan is in full swing. The expected additional capacity, which would be sold during the year, would be around 60,000 MT. This would have positive impact on revenue and profitability for ensuing quarters.
The capacity expansion of 1,65,000 MT in Unit Ballarpur is underway and is expected to be completed in July, 2009, as targeted.
The company’s kamalpur facility which is producing Rayion Grade Pulp has suffered due to Grasin its only customer has reduce its production by 70% in last quarter. This is will continue for netxt quarter also. Irrespective of the demand for Rayon Grade pulp, the company would have the option to link this unit for paper pulp production with Unit Ballarpur’s capacity expansion.
The company has gross debt of Rs 3100 crore and cash of around Rs 300 crore.
The company’s debtor days are less than 30 days.
The current coated paper price is at Rs 49000 and uncoated paper prices at Rs 46200 per tonne.
The company has increase price of uncoated paper by Rs 1200 per tonne in month of October 2008.
The company’s effective interest rate is 8.5%. The interest cost has gone up for the quarter due to high interest rate in month of October and November and rise in working capital of the company. The company expects its working capital to come down with release in inventory in SFI.
The company had launched 4 stores uptil now and plan to launch 5 more stores by June 2009.
The paper products & office supplies business sells more trade goods resulting into low margin.
The company has 2 days of finished stock inventory in December.
The company is working on 100% capacity.
Avanta Power, the company’s subsidiary is in process of setting up of two 600 MW power plants each, for which it will raise fund separately.
The paper demand in Malaysis has slow down. As a result, Sabah Forest Industries (SFI) which use to see 12000 tonne production a month has seen a 17000 tonne stock pile in month of December. By March, the company expects the company will see its inventory to return to normal level of 2000 tonne. Demand for paper in SFI is expected to improve after the Chinese New Year. Inspite of the drop in paper selling prices on the cost side also, the company has significant savings viz. in Oil, Chemicals etc. Hence there won’t be any further margin pressure in SFI.
The company has capex of Rs 300 crore for 2 years and $ 145 million for SFI for next 2.5 years. Along with it the company has maintenance capex of Rs 150 crore per annum.
In next 6 months, the company’s sales volume will increase by 60,000 MT due to capacity expansion at Bhigwan.
The company may go for FCCB buyback, only if it get back at a discount of 30% to 35%.
Demand for paper in India is stable. Though the overall paper demand is generally linked with GDP growth rate, coated paper, copier paper and Hibright paper which BILT currently manufactures is expected to still grow at 10%.
Title is misleading because on consolidated basis, the article says the Capex is about Rs. 1400 crore over the next 2.5 years including Bilt stand alone, Sabah and maintenance capex