THE WEST COAST PAPER MILLS LIMITED
ANNUAL REPORT 2010-2011
CHAIRMAN'S REPORT
The financial year under review Trepresents an inflection point as we
commissioned the largest capacity expansion in our existence, resulting in
record revenues and profits in 2010-11.
This expansion resulted in some distinctive positives for the Company:
* For a number of decades, we were largely an India-focused paper company;
we are now a relatively global company, reflected in our superior quality
that matches some of the best product standards in the world and a growing
global exposure in terms of our marketing presence
* For a number of years, we made incremental improvements in our steam and
power consumption. Following the expansion, our consumption ratios declined
attractively, making us globally competitive.
The result is reflected in our numbers: increase in average realisations in
the writing and printing segment. Additionally, our copier product earned a
premium and accounted for an attractive share in a competitive segment
without any meaningful advertising budget within only two months of its
launch.
Industry outlook
I see optimistic times ahead for the Indian paper industry for some good
reasons:
One, although India is growing, and paper consumption should increase in
the normal run of things, a growing investment in the country's education
sector will catalyse the offtake of writing and printing paper faster than
the global average.
Two, the next incremental major production capacity within the Indian
industry is two to three years down the road even as paper consumption is
growing, which should strengthen realisations and enable manufacturers to
generate a reasonable return on their investment.
Three, a growing dearth of waste paper is likely to affect the asset
utilisation of a segment of the paper industry, resulting in probable
decline in availability from that industry segment and increased
realisations on the overall.
Four, there is a growing shift in consumption from plastic-based products
to paper products, benefiting the paper industry.
Our response
As a company that committed significant investments in capacity building in
the last few years, our primary objective will be to maximise asset
utilisation, to reduce operating costs and enrich our product mix.
During the current financial year, we expect to sweat our assets to rated
capacity and report an even better performance. For instance, we intend to
raise our operational benchmark machine speed from 1,000 meters per minute
to 1,200 metres per minute with corresponding productivity implications,
among the highest such benchmarks in India.
This will also be a time when we freeze our next round of expansion. The
management is inclined to consider buying a second-hand international plant
that will enable us to significantly increase production capacity at a
relatively lower capex. The management will also seek to expand at a non-
Dandeli location, following a review of available infrastructure.
Overview:
West Coast Paper Mills stands to benefit for decades, following significant
investments already made in its capacity.
The Company is attractively placed to derive sustainable benefits into the
long-term on account of its utilities consumption being well below the
prevailing national norms stipulated for the paper industry. This
reinforced our environmental responsibility, leading to sustainability.
Starting from 2011-12, the Company's social forestry scheme will begin to
generate a larger quantum of raw material from within 250 km and from
contracted farmers, reducing logistics costs.
In view of these realities, I am optimistic that the Company will enhance
value for its shareholders in a sustainable way over the coming years.
S.K. Bangur
Chairman