Operational performance

• Plywood & Allied Products:(A)Plywood production rose 0.8% to 9.15 million square meters) in Q2FY15. Average capacity utilisations were 113%. Sales volumes registered a growth of 1.47% to 12.29 million square meters on the back of 28% volume increase in the Outsourcing division. (B)Average net realisation of Plywood improved by 10% to Rs 241 in Q2 FY15. (C)Operating Margin registered an increase of 36 basis points to 9.51%.

• Laminates & Allied Products: (A)Laminates production fell 1.1% to 2.72 million sheets) in Q2FY15. Sales volumes registered a growth of 4.54% at 2.97 million sheets; average capacity utilisations at 108% compared to 110% in the corresponding quarter. (B)Average realisations of laminate fell by 1.4% to Rs 629. (C)Average realisations of decorative veneers rose by 17.4% to Rs 889 per sqm. (D)Operating Margin fell by 169 basis points to 11.07%.

• Medium Density Fibreboards: (A) MDF production declined 1.8% to 35661 Cubic Meters (CBM) in Q2FY15. Sales volumes fell by 6.6% to 37667 CBM. (B) Average Capacity Utilisation was 79% compared to 81% in Q2FY14. (C) Average realisations of MDF improved by 1.6% to Rs 26158 per CBM. (D) Operating Margin rose by 320 basis points at 23.19%.

Financial performance

• The Company net revenue grew by 6.7% YoY to Rs 623.16 crore. OPM fell by 13 basis points to 12.21%. Thus, Operating Profit was up by 5.58% at Rs 76.08 crore. Net Profit rose by 39.7% at Rs. 37.04 crore. Net Profit margin stood at 5.94%. EPS (fully diluted) for Q2FY15 at Rs 15.35.

• Segment wise revenue breakup for Q2FY15, revenue from Plywood & Allied Products division (contributes 50% of total revenue) rose by 13.3% to Rs 312.09 crore and Laminates & Allied Products division (contributes 34% of total revenue) gained by 4.2% to Rs 212.90 crore. Medium-density Fibre Boards segment (contributes 16% of total revenue) fell by 4.9% to Rs 98.80 crore.

• Exports for Q2FY15 were lower by 3% at Rs 86.73 crore and contributed 13.92% of the net revenue for the quarter.

• For H1FY15, net revenue grew by 7.1% to 1139.90 crore. OPM increased by 15 bps to 12.66%. Operating Profit was up by 8.4% at Rs. 144.28 crore. Net Profit gained 37% at Rs. 67.27 crore. Net Profit margin for H1FY15 stood at 5.90% compared to 4.61% in H1FY14.

• Segment wise revenue breakup for H2FY15, revenue from Plywood & Allied Products division (contributes 49% of total revenue) rose by 11.9% to Rs 563.52 crore and Laminates & Allied Products division (contributes 35% of total revenue) gained by 5.1% to Rs 398.91 crore. Medium-density Fibre Boards segment (contributes 16% of total revenue) fell by 1.4% to Rs 178.46 crore.

• Exports for H1FY15 at Rs 164.29 crore grew by 0.40% over H1FY14 and contributed 14.41% of the net revenue for the period.

• The Company expectsIndian furniture industry, pegged at Rs. 71,000 crore, reputed for its design, fashion and technological quality, likely to grow at 13-15% across five years, on the back of growing real estate, tourism and hospitality sectors on the one hand and rising per capita consumption and lifestyle product consumption on the other. Around 80% of the furniture manufacturing industry is unorganised while 20% comprises organised manufacturers.

• The fragmented Rs. 23,700 crore Indian panel products and laminate industry, which provide the raw materials to the furniture industry, is growing at 5-7% annually. Although the unorganised sector accounts for around 80% of the plywood and 40% of the laminate industry, the organised sector's 15-20% annual growth outperformed overall industry growth. MDF growth is expected at 20-25% because of its low base and also shifts of cheap plywood segment to MDF.

The Company expects following are demand drivers to provide the stimulus for real estate growth:

• Semi Urban Demand: Real Estate demand is accelerating in Tier II and III cities and towns. Cities like Bhopal, Bhubaneswar, Coimbatore, Indore, Jaipur, Lucknow, Surat, Vadodara and Visakhapatnam are expected to add over 354 million square feet of residential space in 3 years with sales expected to generate Rs 180 billion in the next 8 years. An increasing number of corporates are shifting focus to Tier II and III cities, accounting for over 61% of the total job creation in India in 2010-11. (Enam)

• Premium Housing Demand: The Net worth of HNIs in India is expected to increase from Rs 45 trillion in 2010-11 to Rs 235 trillion in 2015-16 widening the market for premium housing. HNIs use a fifth of their earnings for investments, of which 37% is in real estate. (Kotak)

• Commercial office space and retail sector: Office space supply in top seven Indian cities is expected to reach 243.5 million square feet in 2011-15 and malls and other retail spaces are expected to account for 57 msf and 112.57 msf respectively (Cushman and Wakefield).

• Hospitality: Tourist arrivals expected to increase to 11.1 million in 2021 from 6.29 million in 2011 leading to an additional demand for 150000 hotel rooms in 5 years (Care).

• Healthcare: India needs to add 1.8 million beds by 2025 to reach its targeted ratio of two beds per 1000 people with an investment outlay of USD 86 billion (India Brand Equity Foundation).