Greenpanel Industries , a leading manufacturer of wood panels, reported a challenging first quarter, with consolidated revenues declining to Rs. 323.00 crore. The company faced multiple headwinds but remains optimistic about its future prospects.

Revenue and Volume Decline

The company's Medium Density Fiberboard (MDF) revenue declined by 12% year-on-year, primarily due to:

• An 8.5% decrease in domestic MDF volumes, attributed to the discontinuation of 37,000 cubic meters of commercial-grade MDF sales following the implementation of Bureau of Indian Standards (BIS) quality control orders.
• A significant 40% drop in export volumes, largely due to geopolitical disruptions in the Middle East.

Despite these challenges, Greenpanel reported a 47% growth in like-for-like domestic sales, excluding the discontinued commercial-grade MDF.

Financial Performance

The company's financial results for the quarter were impacted by several factors:

• Negative EBITDA of Rs. 12.40 crore
• Negative Profit After Tax (PAT) of Rs. 34.60 crore
• A forex loss of Rs. 27.60 crore on Euro borrowings
• Stabilization costs from the new thin panel plant in Andhra Pradesh

Excluding the currency impact, the consolidated operating EBITDA stood at Rs. 13.00 crore, representing 4% of revenues.

Positive Developments

Despite the challenges, Greenpanel reported some positive developments:

• Gross margins improved to 47%, benefiting from a 7% sequential decline in timber prices.
• The company maintained its volume and margin guidance despite pricing pressures.
• Management is focusing on market share recovery through cost optimization and operating leverage.

Industry Trends

Greenpanel noted several positive industry trends that could benefit the company in the coming quarters:

• Reduced MDF imports
• No major capacity additions expected in the near term
• Stricter BIS implementation for smaller players from August

Management Commentary

Shobhan Mittal, Managing Director of Greenpanel Industries, commented on the results: "While Quarter 1 was fraught with a few exceptions, some clearly beyond our control, example, FX movements, and while there are still challenges, especially on pricing for now, our renewed focus will be to recoup lost volumes and regain market share going forward over the next 9 months."

Future Outlook

The company remains committed to its growth strategy:

• Targeting a 30-35% capacity utilization for the new thin MDF plant this fiscal year
• Focusing on recouping lost market share and volume growth
• Countering pricing pressure through expected reductions in raw material and other variable costs
• Optimizing fixed costs and leveraging operating efficiencies

Greenpanel Industries is navigating through a challenging period but maintains an optimistic outlook for the remainder of the fiscal year. The company's focus on cost optimization, market share recovery, and leveraging its expanded capacity positions it well to capitalize on the expected improvements in market conditions.

Greenpanel Industries , India's largest wood panel manufacturer, has released its financial results for the first quarter, revealing a complex picture of strategic growth initiatives alongside short-term financial challenges.

Financial Performance

The company reported a total income of ₹331.61 crore for Q1, compared to ₹370.86 crore in the same quarter last year, marking a decrease of 10.60%. The quarter ended with a net loss of ₹34.62 crore, in contrast to a net profit of ₹15.71 crore in the corresponding quarter of the previous year.

Segment Performance

Medium Density Fibreboard (MDF)

The MDF segment, which is the company's primary focus, faced headwinds:

• Revenue declined to ₹296.74 crore from ₹332.58 crore in the same quarter last year
• Operating EBITDA margin dropped to 4.40% from 12.10% in the same quarter last year
• Domestic sales volume decreased by 8.60% to 89,036 CBM
• Export volumes fell by 39.70% to 13,060 CBM

Plywood and Allied Products

The plywood segment also experienced a slight decline:

• Revenue decreased to ₹31.45 crore from ₹32.37 crore in the same quarter last year
• Operating EBITDA margin improved slightly to 0.60% from -2.20% in the previous year

Strategic Initiatives and Challenges

Greenpanel Industries is implementing a strategic plan to increase MDF production and transition toward higher-value products while boosting exports. Key points include:

1. Capacity Expansion: The company aims to achieve an MDF capacity of 891,000 CBM, with a new plant recently coming online.

2. Product Mix Shift: Focus on increasing the proportion of value-added products, which currently stands at 44% compared to 50% in the previous quarter.

3. Export Challenges: Export volumes were lower at 13,060 CBM compared to 21,671 CBM in the corresponding quarter, attributed to geopolitical developments.

4. Margin Pressure: The company experienced a short-term margin decline following the launch of the new plant, with MDF Operating EBITDA Margins at 4.40%, impacted by low capacity utilization (31%) at the new facility.

5. Cost Reduction: Management is focusing on cost reduction measures to support growth objectives.

6. Network Expansion: Efforts are underway to expand the distribution network to support growth.

Currency Impact

A significant factor affecting the quarterly results was the foreign exchange loss. The company recognized a total foreign exchange loss of ₹275.43 crore, primarily due to the revaluation of its ECB loan of EUR 32.32 million. This was driven by an adverse movement in the EURO-INR exchange rate from ₹92.06 to ₹100.50.

Management Commentary

Shobhan Mittal, Managing Director of Greenpanel Industries, commented on the results: "MDF domestic volumes, including the new plant (adjusted for sales of 36,904 CBM of Commercial grade MDF in Q1 of the previous year, now removed from product portfolio post implementation of BIS QCOs) increased by 47% over the Y-o-Y quarter. However, export volumes were lower due to geopolitical developments. We are focusing on widening our distribution reach and increasing domestic volumes and the proportion of value-added products in future quarters."

Looking Ahead

Despite the current challenges, Greenpanel Industries remains committed to its long-term growth strategy. The company's focus on increasing MDF production, shifting towards higher-value products, and expanding its distribution network is expected to drive future growth. However, the company will need to navigate the challenges of low capacity utilization at its new plant and geopolitical factors affecting exports in the near term.

Investors and analysts will have the opportunity to discuss these results and future outlook with the management in a rescheduled conference call on August 1.