Phoenix Yule sets eye on south

New plant likely in Vizag to meet growing regional demand

Phoenix Yule, the Indian arm of Phoenix AG, a global player in rubber products for industry, is set to acquire an important southern focus in the coming years.

It foresees the south becoming an increasingly important market for its conveyor belts in view of the rapid economic growth taking place there. Hence, the company is set to announce a major expansion there in the latter part of the year, according to managing director T K Mukherjee.

As seems likely, it will set up a 'global factory' in Visakhapatnam which will take its turnover to Rs 200 crore by 2008 from the estimated turnover of Rs 140 crore in the current year (2005). Last year (2004), Phoenix Yule reached a turnover of Rs 126 crore.

Phoenix Yule, which is a zero debt company, plans to fund the expansion through internal resources. Currently, it earns an EBIT (earnings before interest and tax) margin of 6-7 per cent.

The project is likely to cost around Rs 50 crore and is slated to be ready in 12-18 months. It will have the same production lines as the current sole production location near Kolkata but use more modern technology and therefore achieve higher quality benchmarks.

Phoenix Yule, which claims to be the leading conveyor belting company of South Asia, and earns around 30 per cent of its revenues from exports, finds its performance defined by its legacy. It came into existence in 1999 through the conveyor belting business of Kolkata-based public sector Andrew Yule being spun off and the German company Phoenix AG taking up a controlling 74 per cent stake.

The workforce of Phoenix Yule has come down from 640 in 1999 to 525, but even that is considered rather high. The conservative German owners and technology providers have been reluctant to introduce new technology so as to reap the best productivity benefits from it as the workforce would then have to be reduced further. This is not permissible under the disinvestment terms.

Andrew Yule is currently a large loss maker and has come under the purview of BIFR. It goes without saying that the new Phoenix Yule plant will have manning levels dictated entirely by technology.

While Phoenix Yule relies entirely on technology from its parent, it has made a significant beginning in technology development in India by tying up with IIT Khargpur.

The two entities hold a joint patent for an energy optimising compound for used in conveyor belts which reduces energy consumption by 5-10 per cent.

In steel cord reinforced belting, Phoenix Yule has no competition in India though there is lots of it in textile belting which represents the high volume lower margin end of the business.

The company is also the only manufacturer of pipe conveyor belting which helps control pollution in material handling.