Turning Points of 2019 - Organized Sector: Sales Grew, Margins Fell

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Organized plywood sector has been occupying just 25% market share but with the implementation of GST, they expect to increase their market share. For expanding their market size and sales volume, many successfully launched economical grade plywood to cater to all categories of customers. But with the slowdown in real estate and economy, their efforts were not much converted into desired results. Although the organized and big plywood brands maintained their sales growth consistently in double digits but their profit margins reportedly shrunk compared to last year.

The year 2019 would be noted as challenging for organized woodpanel and decorative brands and the drop in their profit margins is an indicator of pressure in this segment. Entire bucket of Plywood, Panels, Decorative laminates or Doors producing companies and brands expanded their network and extended their product categories to cater to different buyer groups but the past Q3 result in FY 2018-19 and the expected results are keeping a profitability pressure among organized players.

Due to an increase in the supply of finished goods and a rise in Raw material costs and higher expenses, the organized sector was seen trying to cut down on various ways, such as substituted raw material and increasing plant efficiency. The ongoing demand slump and price war-like situation were not giving any scope to these companies in 2019. Big brands like Green Ply, Century Ply, Archid, Duro, and more introduced economical range plywood to cater to the demand of middle-class customers and even furniture grade but the material lifting has not been very rosy other than few isolated projects. Slow real estate market, payment pressure and holding on to market share were some of the key reasons for profit drop of formal sector companies, as per trade experts.

Most of the big brands registered around 10-14 % growth in January to November 2019 compared to the previous year largely due to the implementation of GST followed by e-way bills, and the companies had to offer schemes, TOD, CD, etc to maintain the sales tally. The organized companies are in the process of summing up their financial analysis but the possibility of a decrease in profit compared to last year growth is very much expected.

Contrary to plywood, organized decorative laminates brands posted an increase in revenue as well as profit margin in 2019. The HPL brands such as Greenlam, Century Laminates, Merino, Royale Touche, Stylam, etc have registered double-digit growth in the first half this Financial Year, whereas MDF brands are also supposed to regain their profit due to the better realization in the last 4 months of this year.

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