KPR Mill hosted a conference call on 29 Oct, 2021.In the conference call the company was represented by Mr P Nataraj- Managing Director and Mr P L Murugappan- Chief Financial officer and MrKandaswamy-Company Secretary.

Key Highlights of the call:

The company recorded highest ever revenue and profit for the quarter ended Sep 30,2021. Festival business as a whole continues to be good. Yarn business did well in the Sep quarter due to strong domestic demand. The company focus on value added products and cost optimization helped better realizations.

With recovery of US and European markets, garments order remained healthy. The wind power generation during the quarter was also good. The favorable ease of doing business, supportive government policies, competitive labor cost strengthened the Indian Textile industry as an alternative destination for leading international textile players.

Sales volume for yarn stood at 18500-ton, fabric stood at 3000 ton and for garments stood at 27 million ton for Q2FY2022. Sales volume of sugar was 15,000 tons and ethanol sales volume stood at around 1 crore liter.

Sales value for yarn, fabric and garment stood at Rs 500 crore, Rs 86 crore and Rs 455 crore respectively in Q2FY2022. Revenue break-up for Sugar and ethanol stood at Rs 50 crore and Rs 52 crore respectively in Q2FY2022. Sugar inventory stood at 10,000 tons.

EBITDA margin: Usually the yarn margins are around 20% however, in this quarter yarn margins were around 30% also, garmenting margin was around 30% which led to high EBITDA margin in Q2FY2022. Sugar and ethanol margins were around 20%.

Yarn prices are going up in line with cotton prices as such the company expects to maintain yarn margins above 20%.Garment profitability is expected to be maintained.

Cotton Prices: Both domestic and international prices are ruling very high. Irrespective of the high cotton prices, demand for cotton products is also going up. Current cotton price is Rs 65,000 per bale. The company has inventory for one month. Normally the company has 4-6 months inventory.

All the required chemicals are available but at a higher price.

Expansion: The expansion projects of both sugar and garment are nearing completion. The projects will be completed in Q3 and production will commence however, the exact date will be announced.

In the sugar expansion, the full production is expected in FY2022-23. At peak capacity utilization the company can crush 10 lakh ton of sugar cane and produce 75,000 ton of sugar and 6 crore liters of ethanol. In garment, 50% production from the additional capacity is expected in FY22-23 and full in FY2023-24.The combined capacity will be for sugar 1,55,000 tons and ethanol 10 cr liter.

Once the ramping up is over, the company plans to expand on the garment side.

The company is in the process of recruiting the required labor for the new capacity.

The company wants to further expand its operation in India keeping in mind the abundant availability of labour and raw materials.

RoSCTL: The company accrued RoSCTL benefit to the tune of Rs 37.0 cr(Jan-Sep) during the Q2FY2022.

Ethiopia: The unrest is still going on in Ethiopia and the company is in conversation with the Ethiopia investment commission. Progress is yet to be achieved.

Retail Business (FASO brand): The company is doing around Rs 1.5-2.0 cr revenue per month. The company plans to aggressive advertise its products in coming months as it is festive season. Within 2 years, the company plans to go pan India. The company is planning to open exclusive brand outlets for its brand.

Exports: The company key market is Europe contributing around 54% and US around 22%. The company is also exploring other markets including Australia and New Zealand. With new capacity exports to US will increase.

Outlook: The company is positive on the textile industry due to rise in demand and supportive government policies through innovative schemes such as mega textile parks and creation of world class infrastructure which are necessary for this sector and will attract large scale investments.

Oder book stood at Rs 750 crore. The company expects to grow by 15% in FY2023.

EBITDA margin outlook: Since the company is adding value added products, the EBITDA margin will improve to 22-23% levels from earlier 20%.