Dear Fellow Share holders,
Financial Year 2018-19 was a tough year for the company, we have maintained sales but
the margins effected as Chinese textile manufactures stopped or severely restricted
purchase of cotton yarn from India due to ongoing import restrictions by USA on China.
This is impacting Textile Industry due to Chinese manufacturers substantially reducing
import 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 their
inability to pass on the high raw material cost to Customers. Yarn and fabric prices
remained subdued there by impacting margins of textile industry. In addition USD/INR ratio
remained volatile with large fluctuations.
Procurement of Raw Material:
During the 1 st quarter of FY 2018-2019 cotton prices had gone up from Rs 38,000 to Rs
47,500 / candy. However the finished product costs remained stagnant. We have covered
cotton in initial months, due to which we have some what insulated from cotton price
increase. Government had increased MSP of Kapas from Rs 4400 to 5500 per Quintal. Present
cotton procurement season did not support the quality and price of Kapas. The cotton price
is around Rs.48000 to Rs.49000 per candy. Due to failure of monsoon the quality cotton is
not available in the market. Generally we use 32 mm cotton for the NE 60 count. Now
getting 30 mm cotton is difficult. Drought in the major growing states of Maharashtra,
Telangana, 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 in
the 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 present
capacity of ginning.
2. Spinning & OE Units : We have added a Lap former and comber for increasing
combed yarn capacity in spinning division. The waste being automatically transported from
spinning to OE by installing automatic evacuation machinery from VXL, this saved manpower
of pressing the cotton wastes and physically transporting the same. This reduced the man
power. We have installed spindle monitoring system on 12,240 spindles as first phase. This
is helping to increase the productivity and reduce manpower.
3. Laying of underground water pipeline from Gundlakamma River to weaving unit: Installation
of water pipe line from Gundlakamma river to weaving unit is completed. The civil
construction of pump house is in progress. Which result in better performance of dying
unit.
4. Bank Facilities: The long term credit rating of the company was upgraded by
Rating agency "Brick Works Ltd." from -BBB to BBB which recognizes its
comfortable 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 is
submitted. Operational Cost Optimization Electricity is one of our biggest costs by adding
captive power generation will reduce our operational costs. We are actively looking into
possibility of adding Solar plants for captive consumption. Increasing our captive power
generation will help us strengthen our PAT in the future. We have total requirement of
40MW solar power to feed all the units. As first Phase we are looking at different options
of adding 15MW of Solar power in a sustainable way. We may tap capital market for
financing this project. Our fabric made of organic or BCI cotton in combination with clean
energy 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 rights
issue up to Rs. 99.5 Million. After our initial IPO in 1995 we are approaching capital
market now.
Your company is dividend paying company with growing earnings can be rewarding in the
long term. This year also the board recommended a dividend of 10% Since 2012 onwards we
are providing more useful information in your Annual Reports. The Company had been putting
its best efforts to give maximum information to its share holders. For example, in 2018
Annual report we have given last 25 years glories history and has enumerate photos of all
the past directors.
The success achieved in this glories history was literally a team effort. We stand
committed to delivering on our long-term value for shareholders: to grow revenue in line
with or faster than the market; growth adjusted net income faster than revenue; make
targeted, value-added investments; and return excess capital to shareholders
We would like to take this opportunity to thank our employees, suppliers, business
partners. We are truly blessed to have the loyal shareholders and we look forward to meet
you 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