With newsprint costs softening drastically from around $760 to $670 per metric tonne in the last four months, the print sector is hopeful to see a good profit jump in the coming quarters.
The print industry feels that this reduction in cost will provide a favourable position and enhance their financial outlook for the future. Speaking to exchange4media, Matrubhumi Group’s Managing Director Shreyams Kumar said that the price has come to around $575-$600 per metric tonne and it might come down further but the benefit in profit will be seen only by next quarter.
He also said that India is not manufacturing enough newsprint for the market.
“Mills are reducing their capacity and shutting down machines. Logistics are not fully supportive. As per the current market scenario, there is some improvement in the profit but not a big one. If prices further go down, it will immensely help. The prices had reached an unrealistic peak of over $1000 last fiscal. It will take one more quarter to get the full benefit of the price drop,” Kumar said.
The price of newsprint touched an all-time high of $1000/tonne during the last financial year. It came down by nearly 30% by the end of Q4 FY 2022-23. Industry experts say reduced global demand for the paper has led to the reduction in price.
According to the Q1 FY24 Earnings Call of Dainik Bhaskar (DB) Group, the average cost of newsprint has dropped from the previous high of Rs 63,500 ($764) per metric ton in Q2 FY 2023 to around Rs 56,600 ($674) per metric ton in Q1 FY 2024. DB Group also reported that its total revenue grew by 15% Y-o-Y to Rs 5,736 million as against Rs 4,994 million in Q1 FY 2023 and EBITDA (earnings before interest, taxes, depreciation and amortization) grew by 84% Y-o-Y to Rs 1,359 million versus Rs 738 million in Q1 FY 2023 on account of “impressive revenue growth as well as continued cost control, including softening of newsprint prices.” It said that due to the drop in paper prices, the EBITDA margin expanded by an impressive 900 basis points to 24% in Q1 FY24 from 15% in Q1 FY23. PAT (profit after tax) for the quarter grew by 154% to INR Rs 788 million versus INR Rs 310 million in Q1 FY 2023.
According to Amit Chopra, Joint MD of Punjab Kesari, which consumes about 30-32000 tonnes of newsprint every year, the cost of newsprint is currently under $600 per metric tonne but the revenues are only decent as of now as other costs like manpower have gone up.
“Profits will improve slightly with the cost of newsprint coming down but dollar price has also gone up. Also, compared to the last quarter, there is not much difference when it comes to revenue and profit. In the coming quarters, we hope the price goes down even more so that we see better numbers. We have to wait and watch,” Chopra said.
In its Q1 FY24 earnings call, HT Media’s Group CFO Piyush Gupta said the pulp prices and newsprint prices have been coming down for 3-4 months and profit margin will start expanding now.
“The pulp prices and the newsprint prices have been coming down for 3-4 months and we don't go very long in a commodity cycle which is coming down. We don't stock very long inventory, but you know, our inventory prices will, in production, start coming down now, so you will see the margin expanding from here on, and we are not sitting on a very long inventory pile as well,” Gupta said.
Jagran Prakashan Ltd also said that it expects improved revenues particularly in H2 benefitting from lower inflation, increased government spend and “improved profits due to increased revenues coupled with newsprint cost savings due to moderation in prices which is not yet fully reflected in operating results.”
The media houses maintained that the full benefit of reduced newsprint prices is yet to be reflected in margins.
According to industry experts, in the last four-five years, the cost of newsprint has gone up by nearly 90%. The top price for newsprint for 2022 was $1000/tonne, up from $450/tonne in Jan-March 2021.