Key highlights

• The Company net sales de-grew by 6% to Rs 390.3 crores for Q1FY18. Growth was impacted mainly due to extensive de-stocking by dealers in Plywood segments. The Company plywood sales volumes fell12% mainly due to massive de-stocking in the trade channel ahead of GST. On MDF front, volumes improved 9% as sales of lower priced cheap plywood manufacturers (unorganised) was impact ahead of GST. Wallpapers contributed ~Rs 6.34 crore to topline.

• The Company capacity utilisation in the plywood segment was at 101% in Q1FY18 vs. 111% in Q1FY17. MDF's capacity utilisation was at 117% in Q1FY18 vs. 106% in Q1FY17.

• MDF - The Company new MDF plant with 360000 CBM capacity is under construction in Chittoor, Andhra Pradesh. Contracts with suppliers and contractors are in process of execution. Most of machineries have reached the project site and the same are under process of installation. The said facility expected to be commissioned in Q2FY19.The company is planning to export ~30-40% of production. Export margins are seen in the range of ~13-14%. This plant has seen an investment of ~Rs 450 crore in Q1FY18 and is likely to have another round of capex of Rs 300 crs(majorly in FY18), funded through debt as well as internal accrual. Average cost of interest is 7.5%.

• Plywood- (1) The Company construction of new Veneer, Lumber and Panel products manufacturing unit in West Africa, has been completed and the unit has started commercial production of Veneer. (2) In Uttar Pradesh, the company is planning to setup a manufacturing plant for Plywood and its allied products. The company has made an application for the allotment of land in Sandila Industrial Area and it will be operational by 2nd half of the FY19.The company intends to invest Rs 115 crore in FY18 & FY19. (3) Setting up another unit adjacent to the existing unit of the company in Gujarat for manufacturing of decorative plywood/decorative veneersat a cost of Rs 40-45 crore. This unit is expected to be operational by Q2FY19. This plant will take care of Western region and Rs 125-130 crore of revenue is expected from this unit.

• The Company guides 5% growth in plywood volumes and 8-10% growth in MDF volumes considering challenging business environment for FY18 (plywood volume decline in Q1FY18 and continued confusion amid retailers over GST).

• The Company expects growth momentum to pick up from FY19 on expansions in MDF plant (AP), Plywood (UP), Decorative Veneer (Gujarat) and Veneer plant in Gabbon.