Lower raw material cost, price hike helped JK Paper improve margins: AS Mehta

Going forward, the next quarter may be slightly lower compared to this quarter because we are going to take a nine-days shutdown at our Odisha facility, AS Mehta, President & Director, JK Paper, tells ET Now.

Edited excerpts:

There is a strong set of number for you. What would you attribute this expansion in margins to?

The margin percentage here has improved compared to the same quarter in last year and on the preceding quarter also. There are two factors -- higher NSR and also the lower raw material cost. These are the two predominant factors in the improved EBITDA margin.

Would you attribute your growth to the improved market conditions and will this kind of growth sustain going forward as well?


On top line growth, the volume is the same compared to the same period last year. It is the price improvement on product category that helped. Going forward, the next quarter may be slightly lower compared to this quarter because we are going to take a nine-days shutdown at our Odisha facility. This is a regular annual shutdown. Thereafter, from the first quarter of 2019-20, we will have the volume coming from our new Sirpur acquisition. So, there will be some volume increase. Additionally, the price increase will give some advantage for the next two, three quarters.

How much have exports contributed to the revenue? Also tell us a little bit more about your expansion plans, particularly for the international markets going forward?

Our export turnover, is something around 7-8% of the total turnover of the company. Since there is a robust demand in the domestic market, I do not think that export volume will increase further from our existing operation in India.

Is the strict Chinese norms on ban on import of low-grade waste paper on environmental grounds, helping your demand?

No, that does not impact the demand. The only thing is due to the ban of the mixed waste in China, their pulp demand has gone up and since they are consuming more virgin pulp, the pulp prices have moved up dramatically in the last almost eight, nine months or a year or so.

But again, either there is some relaxation in China or their consumption has gone down. So, again the pulp demand was slightly subdued and the pulp prices globally have come down in the last two, three months. But if the demand of pulp goes up in China, then the pulp prices will remain volatile. Pulp prices will directly have impact on the paper prices. If the paper prices move up, it is beneficial for a player like JK Paper because we are a fully integrated player and we produce our own pulp and then from our own pulp we produce paper. So, we have an advantage.

We also understand that trial production has commenced in Sirpur mills. When do you plan to start full production there? Are you on track with your expansion plan?

We were supposed to start in February and we are on track as per our schedule. Test production has just started. There will be few more trials. Full production would start from April because the pulp mill has not yet started. We will start the pulp mill from 1st of April and once that happens, we will start producing from Sirpur. Thereafter, sometime in May or June we will start one more paper machine and thereafter, one more paper machine in a month or so. That’s why I say from June or July, we will have major production quantity coming from Sirpur and this is as per the plan.

Are you looking at any inorganic or organic growth plans?

This was the inorganic growth. We acquired Sirpur last year. We have started undertaking a project which is organic growth at our Gujarat facility. There we will be adding a new board machine of 1.7 lakh tone or two lakh ton.

Also, we will be putting up a refurbished pulp mill of almost 1,50,000-ton capacity. These are the major capexes going forward in the next two years. We are always open for any opportunity, if it is available at the right price because any acquisition should add value to the shareholder and to the business.