Paper Products Ltd's net profit has risen by 29 per cent to Rs 8.75 crore despite a 153 per cent jump in interest cost to Rs 9.3 crore in fiscal 1996-97. However, the company has been unable to maintain the 42 per cent profit growth witnessed in 1995-96. Likewise, net sales have improved only 21 per cent to Rs 149 crore during 1996-97 against a 50 per cent rise during 1995-96.

The slower growth in sales and net profit is attributed to the intense competition in the flexible packaging industry. Though volumes witnessed a healthy growth, sales value dropped due to the reduction in selling price consequent to the fall in raw material prices. Paper Products is engaged in the manufacture of paper products and packages made, board, cellulose films, polyethylene, plastic films and metal foils. The company has cornered almost 60 per cent of the flexible packaging segment and its clienteles include Nestle, Brooke Bond and HLL.

The company's results have failed to push the scrip and it continues to move in a narrow band of Rs 140-146. On April 30, the scrip dropped marginally from Rs 145 (the day the results were announced) to Rs 142 on May 5. On May 6, the scrip dropped further by Rs 2 to Rs 140. The scrip currently trades close to its 52-week high of Rs 155. However, the volumes in the company's scrip have been extremely volatile, rising from 100 on April 21 to a whopping 80,200 shares on April 23. On a equity of Rs 6.14 crore, EPS for 1996-97 works out to Rs 14.24 as against Rs 11.05 in 1995-96.

Other income increased marginally from Rs 83 lakh to Rs 1.22 crore. While total expenditure rose 16.55 per cent to Rs 122.45 crore, the interest burden shot up by 153 per cent to Rs 9.31 crore. For the fiscal under consideration, the company commenced work on the second phase at its Silvassa plant which is expected to start commercial production in the second quarter of 1997-98. The cost of the second phase has been put at Rs 28 crore which is to be financed through long-term debt and internal accruals. The company also took up modernisation of its Thane plant at Rs 12 crore during 1996-97 which is again being financed through long term debt and internal accruals. The company issued NCDs worth Rs 2 crore at 16.5 per cent to ICICI in fiscal 1995-96. Considering the high interest rate scenario in 1996-97, the company's interest burden will continue to be high.

Depreciation for fiscal shot up by 61 per cent to Rs 6.65 crore as capacity expansion at Silvassa went on-stream. The company's tax outgo stood at Rs 2.97 crore, which fell by 15 per cent from Rs 3.5 crore. This includes Rs 18.4 lakh on account of provision for dividend tax. The company's net profit for the fiscal improved by 29 per cent to Rs 8.75 crore, while net profit margin rose marginally from 4.87 to 5.05.

The company's actual performance is marginally lower than that projected during the rights offer in 1995. While the document projected a PAT of Rs 9.98 crore, the actual net profit is only Rs 8.75 crore.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.