Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kuantum Papers Ltd (BOM:532937, Financial) maintained healthy EBITDA margins of almost 22% for Q2 and 23.64% for H1 FY25 despite challenging market conditions.
- The company successfully installed a chip washing system and a dedicated clarifier for canal water treatment, improving pulp quality and operational efficiency.
- Financial closure for the mill expansion project is completed, with orders placed for major equipment, aiming for completion by March 2026.
- The relaunch of Conquer Copier paper with new packaging has been well-received in the market.
- Kuantum Papers Ltd is focusing on specialty paper segments, which are expected to grow due to the single-use plastic ban, potentially increasing specialty paper production from 18-20% to over 30%.
Negative Points
- The company faced a year-on-year decline in operational income by 6.5% in Q2, primarily due to a drop in net sales realization.
- High levels of imports have put pressure on domestic demand, leading to a decline in market operating prices.
- The price of wood raw material remains high, impacting cost structures, with no immediate decline expected.
- The company anticipates continued pricing pressure in Q3, with potential impacts on profitability.
- Imports at lower prices, particularly from Southeast Asia, continue to challenge domestic pricing, despite efforts to initiate anti-dumping investigations.
Q & A Highlights
Q: How have imports affected the paper industry and what is the trend for Q3?
A: Imports have increased compared to the five-year average, continuing to rise in Q3. This is due to favorable conditions in exporting countries. However, demand is expected to balance out with upcoming government tenders and increased demand from the printing and publishing sectors. (Respondent: Vice Chairman and MD)
Q: Are imports priced lower than domestic products, and what is the reason for this?
A: Yes, imports are priced lower, not due to overcapacity but because exporters are operating at lower margins, selling overruns in India. They are leveraging economies of scale to maintain volumes despite lower margins. (Respondent: Vice Chairman and MD)
Q: Is there any initiative to impose tariffs or duties on imports?
A: Yes, the industry has initiated an anti-dumping investigation and approached the government. A notification was submitted on September 30, 2024, and further work is needed before results are seen. (Respondent: Vice Chairman and MD)
Q: What is the outlook for raw material prices, particularly wood?
A: Wood prices are stable or increasing due to competition from the MDF and board industry. However, agro raw materials like Bistra are showing a declining trend, helping reduce operational costs. The situation is expected to persist unless additional wood supply is created. (Respondent: Vice Chairman and MD)
Q: What is the company's strategy regarding capacity expansion and market focus?
A: The company is increasing its capacity by 50% over the next 18 months, focusing on the premium writing and printing paper segment. There is also a significant opportunity in specialty papers due to the single-use plastic ban, with plans to increase specialty paper production from 18-20% to over 30%. (Respondent: Vice Chairman and MD)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
