BILT vs International Paper: Where growth lies? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

BILT vs International Paper: Where growth lies?

Dec 27, 2011

International Paper, an American pulp and paper company is the world's largest paper manufacturing entity. It made news in India sometime back because of its acquisition of Andhra Pradesh Paper Mills. This has made for a case to study the differences that exist between paper companies in India and abroad. In this article and subsequent ones, we will study the basic business models of International Paper (IP) and Ballarpur Industries (BILT), the way these companies are run, along with the regulatory environment they function in.

To start with let us remind ourselves that while International Paper of North America is the largest paper company in the world, BILT too is the biggest in India. This fact will make it even more interesting to analyze these two paper giants and decide which is better.

How the business model differ...

International Paper is a leading player in the paper, packaging and distribution industry. Its operations expand across 24 countries with a working force of 59,500 employees. Through xpedx, International Paper serves the requirements of printers, manufacturers and retailers. Its efficient supply chain and intelligent e-commerce solution help customers meet their needs. The paper company is also involved in recycling of paper and is North America's largest in this category.

BILT is largely into production of paper manufacturing itself. It also sells office stationery and has recently acquired "Premier Tissues" that sells paper tissues. Both these paper companies do not operate in the newsprint segment.

Products

International Paper manufactures all varieties of both coated and un-coated paper. The company also produces pulp used in paper industry and elsewhere. Under the packaging segment, International Paper produces coated paperboard, food service products, packaging for consumer and tobacco markets. BILT on the other hand is into producing coated wood-free, uncoated wood-free, copier paper, business stationery and cream-wove. It is involved in paper tissue business too. The Indian company's focus is on adding new value added products that will be margin additive in nature.

Reliance on exports

In the wake of recent economic turmoil, it is essential to know which countries consume maximum production of these paper companies. How the sales would be impacted, if a few of these countries get into any economic trouble?

International Paper's exports comprise around 30% of the total sales for the company. The products are supplied to a large number of countries including those in United States, Europe, Pacific region and Americas other than the US. It also serves growing markets of Brazil, China and Russia. However, majority sales is in the US making International Paper susceptible to downturns in the volatile US economy. Also, with a stagnant US economy, the company is constantly looking for newer markets to sell its produce.

BILT exports just 14% of its total production. The Indian company exports to around 80 countries globally. Thus while BILT's sales are largely domestic driven, the company is susceptible to global economic headwinds.

Regulatory and competitive scene

Paper industry in India is highly fragmented with a number of unorganized players too in this business. Thus, for BILT the competition is intense and the company has to keep thinking of strategies to deal with it. For International Paper, the scene is not very different. The paper company faces stiff competition from companies producing similar products as well as others who manufacture substitutes of paper like wood and wood fibre products.

Since trees have to be cut to manufacture paper, the sector is highly regulated. Companies operating in the paper segment have to comply with many environmental norms. Although the industry is highly regulated in India as well as the Americas, it is slightly more difficult in India to obtain licenses because of bureaucracy and red tape.

Raw material sourcing

International Paper owns and manages a million acres of forest land. The company takes care of the planting and harvesting of trees and ensuring that these are not put to non-forest uses. The North America based company has a policy of not using wood from endangered forests. In comparison, the Indian government does not allow domestic paper companies to own wood plantations. BILT has an arrangement with the farming community for sourcing of industrial wood. For this, a series of exposure visits of farmers are conducted along with a few training programs to educate them on techniques of raising plantations and yielding maximum productivity.

To conclude

Although International Paper is the largest paper company at present, a stagnant US economy (home country), is forcing it to look outwards for revenues. With the same objective in mind, it acquired Andhra Pradesh Paper Mills. While the international company has all its systems and processes in place, it may well turn out to be a challenge to compete with the local companies in the newer markets that it wants to explore.

BILT on the other hand seems to be in the right place at the right time. A growing Indian economy will demand more paper and paper products and help the company grow its revenues faster over the years. In the next article, we will analyse the financials of both the companies to decide which of the two is a better run and more profitable company.

BILT Vs International Paper - Next article


Equitymaster requests your view! Post a comment on "BILT vs International Paper: Where growth lies?". Click here!

  

More Views on News

JK PAPER Announces Quarterly Results (1QFY21); Net Profit Down 81.6% (Quarterly Result Update)

Aug 24, 2020 | Updated on Aug 24, 2020

For the quarter ended June 2020, JK PAPER has posted a net profit of Rs 250 m (down 81.6% YoY). Sales on the other hand came in at Rs 5 bn (down 34.9% YoY). Read on for a complete analysis of JK PAPER's quarterly results.

JK PAPER Announces Quarterly Results (4QFY20); Net Profit Down 18.6% (Quarterly Result Update)

May 14, 2020 | Updated on May 14, 2020

For the quarter ended March 2020, JK PAPER has posted a net profit of Rs 914 m (down 18.6% YoY). Sales on the other hand came in at Rs 7 bn (down 9.5% YoY). Read on for a complete analysis of JK PAPER's quarterly results.

ORIENT PAPER 2018-19 Annual Report Analysis (Annual Result Update)

Jun 26, 2019 | Updated on Jun 26, 2019

Here's an analysis of the annual report of ORIENT PAPER for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of ORIENT PAPER. Also includes updates on the valuation of ORIENT PAPER.

WEST COAST PAPER MILLS 2017-18 Annual Report Analysis (Annual Result Update)

Apr 2, 2019 | Updated on Apr 2, 2019

Here's an analysis of the annual report of WEST COAST PAPER MILLS for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of WEST COAST PAPER MILLS. Also includes updates on the valuation of WEST COAST PAPER MILLS.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

COMPARE COMPANY

MARKET STATS