"At RSWM we have selected to transform our business model with the objective toshrink our industry cyclicality curve."
In a textile business vulnerable to changes in the costs and availabilities ofagri-commodities and petroleum-based products the principal challenge lies in generatingsustainability from unpredictability.
At RSWM we have selected to transform our business model with the objective to shrinkour industry cyclicality curve resulting in the ability to remain profitable and growingeven in the midst of a sectoral downtrend and outperform our peers during a sectoralrebound.
The principal message that one would wish to communicate to the shareholders is thatthis is not something that we expect will happen in the future; it is something that isalready a reality.
The Companys financial performance in 2015-16 is a reflection of thistransformation. Even as revenues declined marginally (factor of an unfavourable externalenvironment) profits and profitability improved a validation of our differentiatedmindset.
At RSWM we believe that we are the bottom-end of a long J curve.
The Company will accelerate its value-addition foraying into niches that arerelatively untapped shield ourselves from commodity influences and increasingly market toclients that demand quality over cost considerations.
Which explains why even as India continues to be yarn-surplus the future for ourbusiness appears promising
Fibre shift: There is a benchmark relationship between cotton and man-made fibre pricesglobally which in turn influences fibre consumption. On the one hand the cotton crops inChina Pakistan and India appears to have been affected by pest attacks leading toconsiderable increase in cotton prices. On the other free-falling crude prices havereduced the price of man-made fibres indicating a consumption preference for thislower-priced alternative. Going forward increasing climatic vagaries could push cottonprices higher strengthening the demand for blended fabrics. India may start consumingmore polyester than cotton by the next five years widening the market for polyesterfibres.
Consolidation: The Indian spinning industry should witness consolidation. With rawcotton prices moving northward and yarn prices not moving in tandem a number ofrecently-commissioned spinning capacities (taking advantage of the Governmentslow-cost funds pipeline) could become unviable. Although this could firm yarn prices inthe short-term over the medium-term this reality could provide an opportunity to acquirequality stressed assets. Having de-leveraged our financial statements ably we are hopefulof capitalising on such opportunities.
I must assure shareholders that our show of strength at a time of sectoral weaknessprovides an insight into our competitive position. We will continue to make sizeableinvestments in strengthening each vertical independently.
As our investments help meet our goals we expect to report higher revenues superiormargins and increased surpluses thus graduating us into the next growth orbit.
With best wishes