Dear Fellow Share holders
Financial Year 2018-19 was a tough year for the company we have maintained sales butthe margins effected as Chinese textile manufactures stopped or severely restrictedpurchase of cotton yarn from India due to ongoing import restrictions by USA on China.This is impacting Textile Industry due to Chinese manufacturers substantially reducingimport of their Raw material inventory cotton yarn levels as US-China trade war'comes into play.
Rising cotton prices are hitting profit margins of textile players due to theirinability to pass on the high raw material cost to Customers. Yarn and fabric pricesremained subdued there by impacting margins of textile industry. In addition USD/INR ratioremained volatile with large fluctuations.
Procurement of Raw Material:
During the 1 st quarter of FY 2018-2019 cotton prices had gone up from Rs 38000 to Rs47500 / candy. However the finished product costs remained stagnant. We have coveredcotton in initial months due to which we have some what insulated from cotton priceincrease. Government had increased MSP of Kapas from Rs 4400 to 5500 per Quintal. Presentcotton procurement season did not support the quality and price of Kapas. The cotton priceis around Rs.48000 to Rs.49000 per candy. Due to failure of monsoon the quality cotton isnot available in the market. Generally we use 32 mm cotton for the NE 60 count. Nowgetting 30 mm cotton is difficult. Drought in the major growing states of MaharashtraTelangana Gujarat and Andhra Pradesh last year has resulted in lower output this year.Over and above the quality of late picked crop is poor due to the paucity of moisture inthe field. Following are some of the mile stones achieved during year under Review.
Progress of Works:
1. Ginning Unit : We are added new ginning Shed. This will increase our presentcapacity of ginning.
2. Spinning & OE Units : We have added a Lap former and comber for increasingcombed yarn capacity in spinning division. The waste being automatically transported fromspinning to OE by installing automatic evacuation machinery from VXL this saved manpowerof pressing the cotton wastes and physically transporting the same. This reduced the manpower. We have installed spindle monitoring system on 12240 spindles as first phase. Thisis helping to increase the productivity and reduce manpower.
3. Laying of underground water pipeline from Gundlakamma River to weaving unit: Installationof water pipe line from Gundlakamma river to weaving unit is completed. The civilconstruction of pump house is in progress. Which result in better performance of dyingunit.
4. Bank Facilities: The long term credit rating of the company was upgraded byRating agency "Brick Works Ltd." from -BBB to BBB which recognizes itscomfortable position strong business model comfortable asset quality parameters.
An outlook for 2019
1. Captive power: Clean/Green Energy
We are working on reducing electricity cost. SITRA report on Energy monitoring issubmitted. Operational Cost Optimization Electricity is one of our biggest costs by addingcaptive power generation will reduce our operational costs. We are actively looking intopossibility of adding Solar plants for captive consumption. Increasing our captive powergeneration will help us strengthen our PAT in the future. We have total requirement of40MW solar power to feed all the units. As first Phase we are looking at different optionsof adding 15MW of Solar power in a sustainable way. We may tap capital market forfinancing this project. Our fabric made of organic or BCI cotton in combination with cleanenergy will make our fabric more sustainable and attract clothing brands in the future.
2. Rights Issue : on propositi The Board of Directors has recommended for rightsissue up to Rs. 99.5 Million. After our initial IPO in 1995 we are approaching capitalmarket now.
Your company is dividend paying company with growing earnings can be rewarding in thelong term. This year also the board recommended a dividend of 10% Since 2012 onwards weare providing more useful information in your Annual Reports. The Company had been puttingits best efforts to give maximum information to its share holders. For example in 2018Annual report we have given last 25 years glories history and has enumerate photos of allthe past directors.
The success achieved in this glories history was literally a team effort. We standcommitted to delivering on our long-term value for shareholders: to grow revenue in linewith or faster than the market; growth adjusted net income faster than revenue; maketargeted value-added investments; and return excess capital to shareholders
We would like to take this opportunity to thank our employees suppliers businesspartners. We are truly blessed to have the loyal shareholders and we look forward to meetyou in the ensuing share holder's meeting.
Sincerely The Management Board of KTL
G.V Krishna Reddy
JMD & CEO
Date : 11-05-2019
Place : GUNTUR