CEPB aims for global expansion amidst economic upturn

November 08, 2023 (MLN): To optimize the returns and increase its presence globally, Century Paper & Board Mills Limited (PSX: CEPB) is diligently working to broaden its export horizons beyond Afghanistan, the management of the company said during the Corporate Briefing Session (CBS) on Tuesday.

The company’s core business is to manufacture paper, paperboard and packaging products to provide local businesses and individuals with quality products of international standard.

To empower its business further, CEPB recently invested around Rs4 billion in a Business Modernization and Reinvestment (BMR) project, resulting in an amplified production capacity of 274,000 tons, up from the previous 265,000 tons, management unveiled.

The total investment for capacity enhancement amounted to roughly Rs2.86bn, with an additional allocation of Rs1.15bn for efficiency-driven projects, it added.

During the CBS, the management also highlighted that the company has the most substantial integrated pulp and paperboard facilities, boasting a paper and board capacity of 274,000 tons per annum, along with a box capacity of 40,000 tons per annum.

 Being the major player, CEPB held a substantial 11% market share within the total paper and board segment, with noteworthy presence in subcategories, Coated Duplex Board (CDB) with around 36%, and Folding Box Board (FBB) at approximately 22%, the management informed.

It is important to mention that the total size of the domestic paper and board market amounted to approximately 1,925,000 tons in FY23, compared to 1,993,000 tons in FY22. Domestic production met roughly 78% of the local demand in FY23, while the remaining the remaining 22% has been imported to satisfy market requirements.

Pertaining to the power utilization and generation, the management informed that the company's total power generation capacity clocked in at approximately 63MW, while its steam generation capacity reaches around 213 tons per hour.

Utilizing a combination of coal and gas for its self-generated power, the company procures a mix of imported and local coal, depending on availability. In addition, the company also benefits from cheaper gas supply from UGDC, which is 15% to 20% more cost-effective than RLNG.

The house was also informed that the company uses waste paper, wood pulp, and wheat straw as major raw materials.

The waste paper is being sourced from the local market, while the wood pulp is imported from Scandinavian countries, Brazil, and Canada.

CEPB’s management also underlined that the prices of these raw materials have recently experienced a decline, which is expected to positively impact the company's profit margins.

During the outgoing year, CEPB's production output reached approximately 196,000 tons, as compared to 255,000 tons in FY22 mainly on the back of an economic slowdown in the domestic market and the outsourcing of certain product lines.

On the financial front, the company posted a gross profit of Rs1,269mn in Q1FY24 as compared to Rs1,066mn for the corresponding quarter of last year.

The enhancement in gross profit was a result of a mild easing in the costs of materials and energy. Similarly, the net operating profit for the quarter under review was recorded at Rs968mn as compared to Rs800mn for the corresponding quarter of last year.

The management is hopeful that improving the economic landscape will keep fostering optimism for improvement in demand for paper & paperboard after witnessing a decline since last year.

Additionally, the stability in raw material and fuel prices is expected to mitigate cost escalations. If these conditions persist, it is likely that the company will improve sales volumes by making necessary price adjustments in line with prevailing market conditions.

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