Century Paper & Board Mills Limited (CPBM)

Established in 1984, Century Paper & Board Mills Limited (CPBM) is the flagship company of the Lakson Group of Companies. In 1990, Century started its commercial production and quickly became the market leader particularly in packaging boards segment. It is also considered as preferred supplier to printing and packaging industry. Century maintains a fully integrated pulp and paper mill near Kasur, Punjab with a production capacity of 230,000 MT/yr. The writing and printing paper, poster paper, both coated and uncoated board in various sizes and form are the product mix the Company maintains.

CPBM has over the years made multiple strategic business relationships with leading packaging and converting units as well as end users, which include national and multinational consumer companies. Besides having a commanding position in domestic market, the Company has also made its way into international markets. Recently, to become environmental friendly Century has added machine PM-7 based on recycled fibre.

Historical performance

During the last five years, Century Paper & Board Mills Limited (CPBM) has shown good performance. In the last five-year period, it has reported strong net sales CAGR of 18.7 percent. Up until FY13 the Company has demonstrated strong performance in its earnings and has shown a growth rate of 50 percent, which is backed by 10 percent year-on-year expansion in top line every year.

In FY14 however, the overall performance of CPBM was stunted due to rise in the paper imports mainly in the last quarter of FY14. Besides higher imports, the overall production was also declined during the winter season due to the power outage and lack of natural gas. Due to these issues the net earnings in FY14 was recorded at Rs 630 million, a decline of 32 percent year-on-year. But despite the lower dispatches the sales during FY14 has also improved since the Company also raised the prices of its products. The final earnings also received some support from other income which has grown by 16 percent year-on-year. The higher other income came on the back of the greater volume of scrap material sold during the year. However, earnings, as mentioned above, came down due to higher production cost and increase in imports. To tackle the energy problems in FY14 Century has signed an agreement with RUNH POWER of CHINA to install 18 Megawatt Coal Based Co-Generation Power Plant.

The Chairman of the Board Mr Iqbal Ali Lakhani had expressed in the FY14 report that the year 2015 will be tough, and that it may not bring any good news for the shareholders; he was right. Although, the market demand for various paper and paperboard products during the year under review was stable thanks to booming FMCG sector, the company could not maintain market share due to the massive influx of imports. Further, the cost of production remained high due to the higher cost of producing energy to supplement shortages on the national grid. Due to prolonged gas curtailment and increased cheap imports capacity remained under-utilized. In FY15, the production level of 158 thousand tons was achieved as compared to last year's production of 175 thousand tons. The capacity utilization for the year stood at 66 percent of the installed capacity.

Century Paper & Board Mills Limited (CPBM) sold 157 thousand tons of products compared to 170 thousand tons in last financial year. The net turnover for the year under review stood at Rs 13,186 million compared to Rs 14,668 million. However, the operating profit for the year declined quite a bit from Rs 400 million as compared to Rs 1,529 million for the last year. The decrease in operating profit is attributable to the reduction in sales volume coupled with increased cost of inputs. Century Paper has suffered a loss of Rs 205 million compared to last year's net profit of Rs 630 million.

Snapshot of FY16 so far

After witnessing a disappointing FY15, the Company has started the new financial year on a high note. During the nine-month period in FY16, the Paper Company has produced 139,403 metric tons as compared to 120,243 tons during the same period last financial year. Thanks to a favourable energy outlook driven by significant decline in the global fuel prices the Company utilized 77 percent of its capacity during nine months as compared to 67 percent last year.

Regarding sales, it has sold 133,458 metric tons of its products during the nine-month period, which is around 16 percent year-on-year higher volume than the same period in FY15. The net sales during nine months stood at Rs 10.146 billion. This improvement in sales is attributed to smooth production and increase volumes by recapturing the market share from increasing imports by adjusting the selling price at the end of the last year.

Besides a better top line, the gross and net profit also showed overall improvement while the financial cost showed a decrease of Rs 220 million. The drop in KIBOR has mainly contributed to the decline in financial cost. Due to all these improvements Century Paper has come out of loss and made a profit of Rs 194 million for the nine-month period as compared to a loss of Rs 177 million for the corresponding period of the last year.

Stock performance

CPBM started the financial year in an impressive manner, beating the benchmark KSE-100 index considerably for the first three months till September 2015. But after that, the Company failed to beat the index again throughout the year. It saw its lowest level in January 2016 which could be attributed to the higher imports due to decline in prices in China and elsewhere. Since then, however, the stock price has been improving slowly but gradually since it touched the bottom. It is expected that if it continues to perform in a similar manner, it will at least come at par with KSE100 later this year.

Outlook

The firm is slowly witnessing stability in its business thanks to better market demand, which is also expected to remain stable for the rest of the year. The 18MW cogeneration power plant which was commissioned in FY14 has been completed and recently started production. It would help the Paper Company to be able to deal with any power crisis. The higher demand for Company's products will result in better plant operations supported by efficient energy mix from Coal based power plant and continuous supply of LNG.