Release Date: August 05, 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 a healthy EBITDA margin of 25.51% despite market challenges.
- The company achieved its highest ever average finished paper production of 434 tonnes per day and a record-breaking average pulp production of 359 tonnes per day for Q1 FY25-26.
- Introduction of Kosmo Litho SPX, a new product designed for multicolor printing applications, showcasing innovation.
- Significant progress on Project Nirmaan with the installation of MACSuite on power boilers, aiming for AI-driven operations.
- Utilization of surface water from a nearby canal to conserve groundwater and reduce operational costs, benefiting future water availability.
Negative Points
- Demand for writing and printing paper was subdued due to deferment of Government tenders and seasonal factors.
- Input cost pressure from higher imported pulp costs due to increased ocean freight.
- NSRs have declined and are expected to remain under pressure in the near term.
- The company anticipates continued pricing pressures and rising raw material input costs in the next quarter.
- The Red Sea crisis has negatively impacted export volumes, affecting the domestic market demand-supply balance.
Q & A Highlights
Highlights from Kuantum Papers Ltd (BOM:532937) Q1 FY25 Earnings Call
Q: Considering the recent price hike across the industry and anticipated boost from the NEP in the second half, do you foresee our margin reaching the 27% to 29% by Q4?
A: By Q4, we are targeting those EBITDA levels. However, the next quarter will likely see balanced EBITDA levels of about 24%-25% due to pricing pressures and rising raw material costs. We are hopeful to achieve higher EBITDA levels by Q4. - Pavan Khaitan, CEO
Q: How do you manage agro waste during the monsoon season?
A: The ecosystem is well-developed to store material effectively. Wheat straw is stored securely, and we have installed a secondary stage of washing to maintain quality. - Pavan Khaitan, CEO
Q: Can you explain the current pricing scenario and the impact of agro pulp prices?
A: Using 40% agro pulp helps control costs. Wheat straw prices reduced by INR2,000 per tonne, aiding cost conservation. Selling prices decreased by INR5,000 per tonne from the previous quarter. We aim to maintain EBITDA levels with better efficiencies. - Pavan Khaitan, CEO
Q: How does utilizing surface water result in cost savings compared to groundwater?
A: Groundwater extraction costs INR18 per cubic meter, translating to INR90 lakhs to INR1 crore monthly. Surface water costs INR5 per cubic meter, reducing costs to about INR35 lakhs per month. - Pavan Khaitan, CEO
Q: What initiatives are being taken to maintain pricing margins amidst rising expenses?
A: We are investing in new technologies like DDS for yield gains, modernizing machines for higher output, and implementing AI for cost efficiencies. These initiatives should help maintain and improve margins. - Pavan Khaitan, CEO
Q: What is the expected incremental capacity from the modernization plan?
A: We are targeting a 50% capacity increase from 450 tonnes per day to 675 tonnes per day on existing machines, reducing production costs. - Pavan Khaitan, CEO
Q: How do you plan to fund the INR750 crore modernization CapEx?
A: The funding will be through INR535 crore bank term debt and INR200 crore internal accruals. SBI has already sanctioned INR250 crore. - Pavan Khaitan, CEO
Q: What is the current share of imports in the total demand for paper in India?
A: Imports have decreased from 3 million tonnes in FY18 to about 1.8-2 million tonnes annually, regulated by the Government's PIMS. - Pavan Khaitan, CEO
Q: What is the company's strategy for specialty paper production?
A: We aim to increase specialty paper production to 30%-35% of revenues in the next three years, leveraging R&D and flexible manufacturing capabilities. - Pavan Khaitan, CEO
Q: How will the new education policy impact demand for paper?
A: The NEP will be implemented in phases, gradually increasing demand. The domestic industry should be able to meet this demand incrementally. - Pavan Khaitan, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
