JK Paper’s Q2 profit dips 41% as cheap imports and higher wood costs weigh on margins

INDIA — Paper and packaging manufacturer JK Paper Ltd has reported a 41.8% year-on-year decline in consolidated profit after tax (PAT) to INR 74.75 crore (US$8.43m) for the second quarter of fiscal year 2026 (Q2 FY26), citing persistent import pressure and rising raw material costs.

Sequentially, profits also fell from INR 81.23 crore (US$9.16m) in the preceding quarter (Q1 FY26).

The company stated that its performance was “affected by higher wood cost and lower sales realization due to continuing cheap imports.”

The headwinds contributed to a 42% drop in consolidated PAT for the half year, reflecting a prolonged squeeze on margins across India’s paper manufacturing sector.

Harsh Pati Singhania, Chairman and Managing Director of JK Paper, said, “Higher wood costs continue to impact profitability, and lower sales realisation due to cheap imports has affected performance across product segments.”

He added that the company is actively engaging with regulators to address unfair import competition and structural issues in taxation that further strain domestic producers.

A major concern flagged by Singhania is the inverted Goods and Services Tax (GST) structure impacting the paper industry.

“While GST on paper and boards has increased from 12% to 18%, it has been reduced to 5% on converted products, resulting in an inverted duty structure,” he said.

The mismatch, he explained, increases input costs, blocks working capital, and encourages cheaper imports that evade embedded taxes.

JK Paper has made formal representations to the government and GST Council seeking corrective measures.

Despite the profit pressures, JK Paper remains focused on its strategic expansion into packaging solutions, a segment showing resilience driven by e-commerce growth and rising demand for sustainable materials.

The company recently increased its stake in Radhesham Wellpack to 80% in September 2025 and completed the acquisition of a 65.7% stake in Borkar Packaging in October 2025.

These moves are part of a broader consolidation strategy to bring all packaging assets under a single umbrella entity for better capital utilization, supply chain efficiency, and customer engagement.

At its 64th Annual General Meeting (AGM) in September 2025, shareholders approved raising the company’s borrowing limit from INR 3,500 crore (US$394.80m) to INR 5,000 crore (US$563.99m) to support financing for ongoing projects, including the BCTMP pulp mill, maintenance capex, and long-term working capital needs.

Operating across office paper, writing and printing paper, packaging boards, coated paper, and specialty grades, JK Paper’s diversified portfolio provides partial insulation from sectoral downturns.

However, while packaging boards continue to perform strongly, the writing and printing paper segment remains subdued amid digitalization and cheap imports, underscoring the company’s need for strategic agility and policy support to restore profitability.

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