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The Industrial Shed For The Production Of Paper And Paper Products

The Industrial Shed For The Production Of Paper And Paper Products

Description

The report that is been provided by this report explains a brief financial segment of producing paper & paper products by renting an industrial plot and how Covid-19 induced lockdown impacted the industry’s performance. Also, the Wholesale Price Index (WPI) and outlook for the industry is discussed. Financials of paper & paper products industry. The paper & paper products’ industry sales remained subdued during FY20 (as can be seen from chart 1 below) mainly due to low prices and high imports. On the profitability front, while the industry PAT margin remained in the range of 7%-9% in each of the first 3 quarters of FY20, it marginally low to 5.4% in the March 2020 quarter.

During FY20, the overall Wholesale Price Index (WPI) for the manufacture of paper and paper products declined by 1.8%. The WPI for ‘manufacture of pulp, paper and paperboard’ (the largest segment in WPI for the manufacture of paper and paper products) fell by a higher 3.4%. A drop in input costs is believed to have resulted in low prices of paper & paper products. The international NBSK pulp prices (input prices) were down by 19.3% to USD 955 per tone in 2019. In addition to this, an increase in total imports of paper and newsprint by 5.7% also affected the industry’s sales during the year.

During the first quarter of FY21 (Q1FY21), the industry’s sales performance weakened and the revenues declined by a significant 47.2% due to Covid-19 induced lockdown and the PAT margin entered in the negative territory at -2.6%. The production of paper & paper products industry was affected during the quarter as the industry operations were shut in the initial phase of lockdown. While operations resumed with reduced capacities as restrictions eased, challenges remained in terms of logistics disruption and migration of labour. In addition to this, subdued demand from consumers also impacted sales. Closure of education institutions, adoption of work from home by offices, muted demand for printing of newspapers among others disturbed the consumption of paper & paper products thus affecting industry sales. Moreover, subdued consumption also had an impact on prices of paper & paper products (detailed below) which further affected the revenues of the industry during the quarter. WPI of paper and paper products. The WPI for the manufacture of paper & paper products segment was down by 2% on a yo-y basis during Q1FY21. Of this, the segments that find their use in offices and educational institutions like paper for printing & writing (P&W) and map litho paper saw their WPI fall by a higher 4.7% and 6.1%, respectively. In addition to this, WPI for newsprint declined at a much pace of 9.1% which indicated muted demand for newspaper printing. The WPI for craft paper segment used in packaging on the other hand fell by a marginal 1.4%.

While WPI for the varieties (paper & writing, map litho and newsprint) fell in the range of 5%-9%, WPI for segments like corrugated sheet box, duplex paper and paper carton/box which find their application in packaging increased by 0.4%-1.3% during Q1FY21. Import restrictions on waste paper and closing of domestic companies due to lockdown affected the supplies of packaging materials which is believed to have caused the WPI for these varieties to rise. Waste paper is used to make packaging materials like kraft paper which is used to create corrugated boxes. Besides, easing of restrictions in different phases of lockdown resulted in the resumption of economic activities and operations of various businesses through at lower capacities which aided the demand for packaging of various products manufactured by several businesses. It is to be noted that packaging grade paper accounts for the highest share of about 54% followed by printing & writing, newsprint and speciality paper with a share of around 35%, 7% and 4%, respectively, in the domestic paper industry demand.

Outlook

With various unlock guidelines announced by the government, more employees are expected to resume work from offices, though in a graded way, which is likely to augur well for paper segments that are used in offices like printing and writing paper, map litho paper among others. However, demand for these segments from education institutions will remain affected as these entities continue to be shut as per recent unlock 4 guidelines and is expected to improve only from the first half of 2021 when the educational institutions are likely to get back to normalcy. Notwithstanding this, the usage of printing and writing paper for education purpose (printed worksheets, textbooks and notebooks) has resumed, although the sessions are held online.

The resumption of economic activities in a phased manner, however, is likely to support the circulation of newspapers and advertisement spends of businesses on an m-o-m basis which, in turn, is expected to improve the demand for newsprint to an extent. Challenges though will exist as cost-cutting measures by various businesses will restrict advertisement spends and circulation of newspapers will also remain affected unless offices, transport services (rail services, airline services) etc. Operate at pre-COVID-19 levels and household circulation of newspapers return to normal levels. In addition to this, the printing of newspapers will take some time to return to regular levels as we have seen that even though the newspaper companies have started printing, the number of papers published by them has reduced (for example the number of papers published in a newspaper has come down from 24 pages to 16 pages or even less than this) due to absence of advertising. Also, it is to be noted that magazines have resorted to digital platforms to avoid loss of readers which is also a cause of concern for the newsprint segment.

Tags – Industrial shed for sale, Industrial space, Industrial land for sale near me

Sources – Economic times and care ratings