CORRUGATED PACKAGING: Future Perceptions & Global perspectives

Evolving Business Paradigm

4th

October 2011

M L Agarwal Central India Packaging co Pvt Ltd

Hyderabad - India

THE CHANGING FACE OF INDIA ..

YESTERDAY TODAY

Slow Growth Rate High Rate of Inflation Poor Credit Availability Very Low Foreign Exchange Reserves License & Control Regime Isolated Economy & Markets Fragmented Industry & Markets Serious Infrastructure Bottlenecks Low on Self Belief and National Pride

The Second Fastest Growing Economy Among Highest Foreign Exchange Reserves On way to Free Market Economy Integrated with the Global Economy Promising Consumer Markets Significant Investment in Infrastructure Creation for Industry Mature Market for IT & ITES Exports becoming more vibrant

Growing Self Belief & National

Pride
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INDIA TOO LARGE TO BE IGNORED

Among the Top 5 Economies (PPP) 2005
Fourth Largest Economy in terms of Purchasing Power Parity...

Source: CIA
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INDIA ADVANTAGE- Demographics

One of the Largest & Fastest Growing Consumer Markets led by a rising Middle Class (400 Million Strong) Young India About 50% Population under 25 years By 2050 share of Working Age Population (15-64 years) projected for China 52% & India 60%

Worlds Leading Knowledge Economy with highest number of Qualified Engineers & among Largest Pool of Skilled Labour, Scientists, IT Professionals & Managers

INDIA ADVANTAGE
Global hub for Outsourcing of Services & Manufacturing IT & BPOs key growth drivers Indias rapid emergence as a factor in the global economy offers huge opportunities for Global Investors Total FDI inflows up 42% to USD 7.5 billion in 2005 USD 25 billion accretion to FOREX Reserves from International Investors in current year 85% of FCCBs in Asia in current year from India alone. 2 years ago it was only 2% Indias Foreign Trade booming with a growth of 25-30% with Exports crossing USD 100 billion

INDIAN PAPER MARKET A SNAPSHOT

Demand Growth for Paper among Fastest in the World Share of Coated Woodfree in Printing/Writing increasing rapidly Corrugated Papers are by far the largest consumers of Paper Packaging Board demand growth is led by High-end Bleached Boards
Total Demand 14 Mln. Tons
Splty. Paper (0.20 Mn. T) Branded Cut-Size (.4 Mn T) Packaging Boards (2.20 Mn.T) Low-End W/F (3.40Mn. T) High-End W/F (1.68 Mn T) Coated Paper (1.2 Mn T)

Corrugated Packaging Papers (4 Mn. T)

Fact Sheet
Per capita consumption 12.15 Kgs Double digit growth in Branded Cut-Size papers, Pkg. Boards, Coated Papers

EMERGING TRENDS IN THE INDIAN PAPER MARKET

Indias Large domestic paper market experiencing rapid growth (7-8% compared to 5-6% in past) aided significantly through enhanced domestic supply/ capacity

Education - Governments High Priority Area(6% of GDP) another Key Growth Driver
Massive investments in Printing Industry spurring Growth at a CAGR of over 14% (Over 100,000 Printing Presses in 2005)

India Emerging as a Global Hub for High-Quality Printing at a competitive cost

Strong Consumer Demand for Packaged goods fueling high growth in Industrial grades of Paper & Boards largely led by growing disposable incomes & Lifestyle changes

INDIAN PAPER INDUSTRY MOVING TOWARDS SCALE

Industry Striving to achieve International Competitiveness through Scale A Large Number of Significant Projects in pipeline

Current - 2010 No. of Kraft Paper M/C with 0.1 Mn T Capacity Number of Mills with Capacity of 0.1 Mn T 2

Projected 2015 20

30

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PER CAPITA CONSUMPTION Other key sectors vs SELECT ASIAN COUNTRIES INDIA
Country Per Capita Consumption (Kg)

China

42 22
12.15 51 106 16 14
Source: Paperloop

An increase in consumption by one kg per capita will lead to an increase in demand in excess of 1.2 million tons.

Indonesia
India Thailand Malaysia Philippines Vietnam

Indias Low Per Capita Consumption offers a huge opportunity for consumption growth
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PER CAPITA CONSUMPTION Corrugated Board Other key sectors vs SELECT ASIAN COUNTRIES INDIA
Country Trends in Per Capita Corrugated Production in SE Asia and - 2005 and 2010 2005 2010 Population Corr. Prodn. Per Cap. Corr. Prod. Sq M Popn Corr. Prodn. Per Cap. Corr. Prod.

Mn

Msm

Mn

Msm

Sq M

An increase in consumption by one kg per capita will lead to an increase in demand in excess of 1.2 million tons.

India
China

1093.6

3900

1184.1

6968

1275.6
228.9 24.0 162.4 87.9 4.4 64.2

25536
2172 1176 301 1131 257 2593

20
9 49 2 13 58 40

1310
243.0 26.1 179.6 95.9 4.7 66.3

35107
2555 1336 416 1443 238 3121

26.8
11 51 2 15 51 47

Indonesia Malaysia Pakistan Philippines Singapore Thailand

Source: ICCA

Indias Low Per Capita Consumption offers a huge opportunity for consumption growth
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Indian Corrugated Industry in relation to Rest

Top 15 Countries 2005 by Area of Output Production Forecast Growth 05 - 10 2005 Msm Tonnes Msm Tonnes % p.a. 39991 27157 2667 1811 1.3 25536 18598 16178 9571 10.3 13729 8770 473 206 0.7 7923 4051 672 237 1.6 6448 3829 851 471 2.5 5707 2967 397 165 1.4 4667 2645 789 368 3.2 4324 2261 92 -64 0.4 4005 2157 655 243 3.1 3900 2535 3068 1995 12.3 3485 1884 70 2 0.4 3157 1834 684 288 4.0 2922 1893 564 346 3.6 2593 1669 528 241 8.6 2351 1322 1113 586 8.1 35202 20504 7875 3863 4.1 163589 102755 35565 19743 4.0
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Country 1 USA 2 China 3 Japan 4 Germany 5 Italy 6 France 7 Spain 8 UK 9 Brazil 10 India 11 Canada 12 South Korea 13 Mexico 14 Thailand 15 Russia Others 46+ Total

INDIAN CORRUGATED PACKAGING INDUSTRY A PARADIGM SHIFT

High Growth Economy Increasing Spend on Education IT Revolution

Enormous Domestic Market potential

Access to International Financing

Growing Consumerism
Move towards Organized Retailing

Move Towards Scale of Production

Industry Consolidation
Large Pool of Technical Personnel
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Competitive Manpower Cost

pportunities
Corrugated Packaging

Exports of Boxes

CHALLENGES FOR THE INDIAN CORRUGATED INDUSTRY

Lack of Contemporary Technology

Fragmented Production Operations

Customer Emphasis on HACCP / ISO2200 VAT GST Impact on Business

Scarcity of Virgin Fibre (Wood Pulp)

High Energy Cost

Management of Environmental Issues

The biggest Industry Challenge is to Significantly raise the Per Capita Consumption of Paper in India
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INDUSTRY FOCUS
Fundamental Transformation in Investment Strategies of Leading Industry Players led by Market Demand & Competitiveness issues (Quality & Costs) From Fragmented Production to Scale with Contemporary Technology

From Manufacturing mind-set to Customer Centric

From Commodity to Branding Large Scale Modernisation at user end- both in Printing & Packaging Focus on Value-Added Products Increasing Retail consumption of Branded Products in Rural India From Domestic Markets to International Markets
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