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R. Balaji

Chennai, Jan. 24 Seshasayee Paper and Boards Ltd has put on hold its Rs 350-crore paper production capacity expansion plan.

Mr N. Gopalaratanam, Chairman and Managing Director, Seshasayee Paper, said the decision follows the uncertain market conditions that have hit demand and paper prices. Demand in the domestic and international markets have shrunk in tune with the economic slowdown.

Threat of imports is another major concern in the coming year. These are expected to put pressure on prices and margins for the paper industry. The company has decided to put on hold the plans to double its production capacity with an additional one-lakh tonnes a year of paper production, he said.

The company recently completed an Rs 370-crore plan to expand and modernise the pulp mill. The expanded capacity has gone on stream and its operations are expected to stabilise soon. This would strengthen the Seshasayee Paper’s in-house pulp production capacity and insulate it from the international fluctuations in raw material pricing.

According to company officials, the new pulping system is expected to stabilise in February and be fully integrated with the paper production line.

Seshasayee Paper has reported a steep drop in net profit for the quarter ended December 31, 2008, with a net profit of Rs 42 lakh on a total income of Rs 138.87 crore. During the corresponding period in the previous year the company reported a net profit of Rs 13.57 crore on an income of Rs 122.08 crore.

Increase in the price of raw materials, fuel, interest and finance charges and depreciation have contributed to the drop in profits, the company said.

Interest cost has gone up to Rs 7.43 crore (Rs 1.40 crore) and depreciation Rs 8.28 crore (Rs 4.58 crore).

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