Key highlights

• The Company Net Sales declined by 6% YoY to Rs. 420 crore in Q4FY18. Plywood revenues dropped by 0.2% YoY to Rs. 305.78 crore, contributing 72.8% of net sales; MDF revenues was down by 23.7% YoY to Rs 105.11 crore, contributing 25% to net sales; Wallpaper and others sales at Rs 9.11 crore, contributing 2.2% to net sales.

• The Company gross margins were lower by 310 bps YoY to 44.8%, due to lower realisations in Plywood and losses in Wallpaper and others category. EBITDA margins was down by 290 bps YoY to 13.9%. PAT was down by 22.1% YoY to Rs. 32.6 crore.

• The Company working capital cycle increased by 11 days YOY to 62 days due to increase in Inventories in Q4FY18.

• The Company net debt to equity at 0.71 (0.29 after excluding borrowings for expansion projects) as on 31st March, 2018 as compared to 0.54 as on 31st March, 2017. Debt includes Rs 384.62 crore on account of new MDF plant.

• Plywood: (A) Plywood production inclined by 0.7% to 8.99 million square meters (million sqm). (B) Average capacity utilisations increased to 111% as compared 110% corresponding previous quarter. Sales volumes increased by 5.3% to 13.88 million sqm. (C) Average net realisation of Plywood decreased to Rs 217 per sqm from Rs 231 per sqm corresponding previous quarter. (D) EBITDA Margin fell to 9.1% from 12.1% corresponding previous quarter. For FY 2018, A) Plywood production declined by 1.5% to 34.39 million sqm. (B) Average capacity utilisations stood at 106% as compared 108% corresponding previous year. Sales volumes increased 1.6% to 51.08 million sqm. (C) Average net realisation of Plywood decreased to Rs 222 per sqm from Rs 229 per sqm corresponding previous year. (D) EBITDA Margin fell to 10% from 11.2% corresponding previous year.

• MDF: (A) MDF production declined 17.3% to 42,119 cubic metres. (B) Average capacity utilisations were at 94% as compared 113% corresponding previous quarter. Sales volumes dropped 24.3% to 40,468 cubic metres. (C) Average net realisation of MDF rose to Rs 25,954 per cubic metres from Rs 25,737 corresponding previous quarter. For FY 2018, (A) MDF production declined 4.5% to 1,80,736 cubic metres. (B) Average capacity utilisations were at 100% as compared 105% corresponding previous year. Sales volumes fell 2.7% to 1,79,908 cubic metres. (C) Average net realisation of MDF was up 1.7% to Rs 26,202 per cubic metres.

• The Company have entered the lower segment of Plywood through the outsourcing route with introduction of two new brands "Bharosa and Jansathi" and this should provide Company a new category for growth in the Plywood category. Margins are expected to be lower than the premium segment but this should lead to a significant improvement in Plywood ROCE.

• The Company guides 12-15% growth in plywood volumes and 40% growth in MDF volumes in FY 2019. The Company expects plywood Margin expected to improve by 100 basis points with increased usage of Gabon Face Veneers.

• The Company expects that implementation of the E-way bill system will lead to a significant shift from unorganised to branding. The Company expects increasing urbanisation, higher disposable incomes and a growing middle class coupled with rollout of GST to facilitate faster shift from unorganised to branded products in the plywood space

• The Company expects Commercial Production in Andhra MDF plant to commence in June 2018 and that should lead to a strong topline growth in MDF between FY 2019 to FY 2021.

• Expansion Plans: Plywood- The Company plans to increase outsourcing proportion to 30% from 22% presently over the next 3 years, Expansion in face veneers operations in Gabon, Setting up of Deco Veneer plant near Rajkot, Gujarat operational by Q2 FY 2019. MDF - The Company new plant in Andhra Pradesh with capacity of 360000 CBM to commence commercial production in June 2018.