The evolution of the plywood and laminate industry is recorded like a film in my mind. It was the year 2000 when the ideas of contributing to the wood based industry in making it organised and grow, cropped up. I began tracking India’s wood panel space and now it is over 20 years in this domain. What was evident in 2001, that plywood industry will grow multi-fold in future, is a truth today. This industry has grown 20-fold since then.
But with volume growth, profit for industries have evaporated in the air. There is no documented proof for various industries but the unrest is extreme and visible on ground. Out of thousands of units in North India, there are more than 200 units that are either shut, ran out of funds or not in a position to operate further. Thus, most of them are slogging.
This is also evident from the balance sheets of organised brands where profits are far lesser, if compared with MDF, Laminates, Particle board etc. If one is running a small unit of 50 tons per day of ply production, the chances of good margins are just limited to imagination. Even for 100 tons/day capacity producers, the net profits have dropped to 3-4%, if they include interest, taxes and directors’ salaries in accounts. In fact, for units who have a higher debt exposure, the viability is in negative zone. Many of the producers are aware and accepting it silently but there is no activity on play that can save from future consolidation in plywood sector.
What are the reasons behind this situation? Some of the key factors are:
1. Lack of timber availability and industry’s focus on plantation
2. Lack of product standards and commonly agreed upon testing methods in use
3. Lack of eagerness to create a product image in plywood category
The profitability in any segment comes when each stakeholder has something to sow, and gains to reap. In plywood, it is a wide play of quality variations. Playing with thickness of veneers, grading, mixing inferior materials in chemicals, selling with variation in standards, selling duplicate and substandard materials stamped as 710 etc – where will such practices lead to? Growth? No chance!
Most of the stakeholders are undercutting each other in their own good way to save some profits. The situation worsens when timber prices goes above Rs 800. The writing is clear on the wall. The three points mentioned above needs extreme consideration. This may save several hundreds of industrial units who are still doing significantly well. Take action! If action not taken, the number of outgoing players will rise exponentially.
Start planning on doing business like business, with good quality, and fine planning. Keep reading Ply Reporter!