Best of Luck for FY 2019-20

person access_time   4 Min Read

Efficiency and cost saving actions in plant are going to be the defining mantras for manufacturers in FY 2019-20. Plywood & Laminate industry is set to operate on low margins for another 2-3 years but intelligent ones will not give up on their marketing efforts. FY 2019-20 is a year for market efforts not manufacturing expansion. Those who are playing with economical grade with right brand planning and with a mind set of operating on lesser margins in this financial year will be the survivor in present times.

The month of February (or January too) was very depressing with respect to sales and collection for plywood and laminate trade. It was easy to spot enterprise owners in panic due to very poor sales volume and prolonging credit limit from 60- 90 days to 120 days plus. The drop in sales and rise in outstanding is big worry which is largely attributed from few key reasons.

First reason for ongoing complex slowdown lies with source i.e ‘housing and reality sector’ which is yet to take off from stagnation and weak sales. Unless the demand for housing and buildings take a positive curve, the demand for building materials are not going to grow. The second reason for the ongoing issues are ‘rampant capacity addition’ without proper plan in place at manufacturers end. The production capacities in plywood and laminates are even crossing over twice of the present demand hence bringing down sales or market share of every player. The plywood production capacity is nearly 13 lacs metric ton every month where as HPL segment capacity is over 4 crore sheet every month which is estimated to be consumed by 2025 or more depending upon growth in the country or other geopolitical issues and global scenario. if the India’s growth story kept roaring, it will be good for all.

The third key reason for the gloom is “shortfall in capital and tightened banking support’. Banking norms have become strict which is opposite to the way Indian business enterprises were habitual of. Now the banks can declare any asset as NPA if a small time failure is noticed. The tightness has led to dried liquidity flow in every sector of market thus making most of the project struggle, prolonged and payment cycle increase. The vital factor in shortage of funds in building material segment is also due to, informal business culture. Enterprise/people are filing higher returns thus paying higher taxes in form of income tax, GST to build their books after 2017. The tax cost plus interest burden has created a capital shortage or imbalance in market. People in building material trade are firat time understanding the need of banking or formal ways of doing business which is taking some time at present. Factories, dealers have to build their books, infuse capital and build businesses now, unlike the previous times. Demonetisation and GST reform has pushed India towards a new business culture build up due to which money/ payments dried up for now.

The above reasons are root cause for present depression though there are few including leading brands who are immune to this scenario thanks to their visionary plan on which they acted 5-10 years ago.

The mid size, ambitious companies have to work round the clock to build their enterprise with vision. Its no more a casual money earning era like before. High efficiency, less than 1-2% wastage, active marketing plan, dedicated and motivated sales team, right advertising and promotion plan with on toes follow up are the way out in present situation. Its no more casual approach instead one has to have big heart and broad mind to spend.

Efficiency and cost saving actions in plant are going to be the defining mantras for manufacturers in FY 2019-20. Plywood & Laminate industry is set to operate on low margins for another 2-3 years but intelligent ones will not give up on their marketing efforts. FY 2019-20 is a year for market efforts not manufacturing expansion. Those who are playing with economical grade with right brand planning and with a mind set of operating on lesser margins in this financial year will be the survivor in present times. I believe time will tell, who is on the right path…the best wishes for Financial year 2019-20. Keep yourself updated with The Ply Reporter.

shareShare article

Post Your Comment