Century Paper & Board Mills Limited (CPBM) was established in 1984, and it was listed on the Karachi Stock Exchange in 1990 as a flagship company of the Lakson Group. The Company is a producer of packaging paperboard and is the market leader in Pakistan.
The company maintains strategic business relationships with leading packaging and converting organisations. Located near in Kasur, the company maintains a fully integrated pulp and paper mill with all the necessary support systems. The company has a production capacity of 230,000 MT/yr. The product mix includes writing and printing paper, poster paper, both coated and uncoated board in various sizes and forms. Recently, the company also added the environment-friendly machine PM-7 based on recycled fibber.
The Lakson Group of Companies is one the leading groups of the country with diversified interests in industries such as soaps and detergents, instant fruit drinks, textiles, surgical goods, information technology, insurance, print and electronic media.
Prior Performance Century Paper & Board Mills Limited (CPBM) has maintained strong historical performance trend by keeping strategic business relationships with packaging and converting units along with end users that include national and multinational companies. Net sales over five year's period register strong CAGR of 18.7 percent. Since FY11, the company has shown strong performance in its earnings and up till FY13 it showed a growth rate around 50 percent that is backed by 10 percent top line expansion every year.
The paper company has performed exceptionally well during FY13. The net earnings registered at Rs 928 million with an EPS of Rs 6.09. The earnings were up 80 percent against the profit after tax of Rs 515million with EPS 1.40 achieved in FY12. Growth is primarily attributable to improved top line on the back of better volumetric sales with further assistance provided by lower finance costs. Volumetric sales of 181 MT are recorded for the year, improving by 5 percent year-on-year against the sales of FY12 of 172 MT. Net Sales regarding rupee value stood at Rs 14, 236 million, a 10 percent increase in the sale of Rs 12, 923 million in FY12, a 10 percent increase.
The imported board and paper products are the direct competitors of Century's products and in FY 13 the imports were declined primarily due to rising US Dollars and higher import duties. In FY13, in value terms a total of $376 million worth of paper and board products was imported which shows a decline of 6 percent year-on-year, against FY12 imports of $399 million. FY12 imports also display a decrease of 3 percent, against FY11 imports of $410million, maintaining the trend of declining imports. The imports of paper and board products are subjected to 25 percent import duty, 15 percent regulatory duty, 18 percent sales tax and 2 percent WTH. All, these measures has reduced the imports during the period under discussion and helped the Century to increase its fortunes. The company also received some help from declining financial cost in FY13 that came down to 24 percent in year-on-year comparison.
After the end of successful FY13, the company was not able to maintain a regular supply of the product to its customers in winter season due to energy constraints. The full utilisation of capacity was severely restricted due to limited availability of energy. In quantitative terms, the sales of the Company for the year under review were 170 thousand MT, compare to 181 thousand MT in FY13. The rupee value of the net sales for the year under review stood at Rs 14,668 million, compare to Rs 14,236 million in FY13, showing a slight increase of three percent that was due to the increased selling price of the product mix. The industry in Punjab saw a total closure of Gas supply from the end of December 2013 to March 2014. However, in FY14 the company signed with RUNH POWER of CHINA for 18 Megawatt Coal Based Co-Generation Power Plant to overcome the energy crises. The net profit after tax of the Company for the year under review decreased to Rs 630 million compared to last year's net profit of Rs 929 million.
The FY15 brought bad news for the company and after performing well in last few years it went into the red. Even though the market demand for various paper and paperboard products during the FY15 was stable, thanks to the FMCG sector but the company could not maintain market share due to the massive influx of imports. Additionally, the cost of production remained high due to the higher cost of producing energy to supplement shortages on the national grid. In the face of these high costs of production and depressed prices due to dumping, the company was forced to sacrifice some market share by limiting production to what could be sold at prices that could offset product costs. During FY15, the company sold 157 thousand tons of products compared to last year sales of 170 thousand tons in last financial year.
Financial performance 1QFY16 While the fiscal year 2015 was certainly quite disappointing for the company due to energy issues and market losses, FY16 is being anticipated as a year the CPBM will make a comeback. The firm saw a sale volume of 40,099 metric tons of as compared to 39,866 metric tons posted for the corresponding quarter of the last year. Sales value is declined by 12 percent due to the decrease in the average selling price of the products. The gross margin for the period has declined by 500 bps is mainly because of the drop in sales value, even though offset to some extent by the decrease in inputs cost. The company has posted a net loss of Rs 3 million as compared to profit after tax of Rs 67 million compared to the 1QFY15.
Outlook The firm will continue to face issues related to energy as the government is again planning to shut down gas to the industry in Punjab in the winter. Although, CPBM is working on completion of 18MW Coal Based Co-Generation Power Plant, however, the project will not come online until January 2016. Therefore, the Company will have to resort to expensive alternate fuels usage, and it will certainly put pressure on the fortunes of the company.
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CENTURY PAPER & BOARD MILLS LIMITED
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FY11 FY12 FY13 FY14 FY15
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Profitability
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Gross margin 17% 16% 18% 14% 7%
Operating margin 14% 13% 15% 10% 3%
Net margin 3% 4% 7% 4% -2%
EBITDA to sales 21% 19% 21% 17% 10%
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Liquidity
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Current ratio 1.06 1.08 1.59 1.41 1.21
Quick/Acid test ratio 0.2 0.34 0.46 0.31 0.34
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Activity & Investment
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Fixed asset turnover 1.22 1.37 1.58 1.73 1.68
Total asset turnover 0.84 0.97 1.08 1.13 1.07
EPS (Rs per share) 0.17 1.40 6.09 3.46 1.89
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Source: Company accounts
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