60% of Kerala Chemicals & Proteins' turnover are exports

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AK Nair , MD of Kerala Chemicals & Proteins shares how his company achieved a turnaround in FY07. It increased the productivity by certain productivity techniques and improving the technology and by changing their fuel.

Excerpts from CNBC-TV18's exclusive interview with AK Nair:

Q: Could you tell us what went right for you in FY07 and whether your margins at 10.5% are actually sustainable?

A: It is a sustainable performance because we have done a lot for increasing the productivity and controlling the cost and we also have an improved market demand because we need to have the compliance requirement from international regulations. We also have a better demand for the intermediate product called Ossein to Japan .

Q: You are also looking to increase the production of gelatin by about 10% in your company, could you tell us how much that is going to cost you and how you are proposing to fund that?

A: We are raising it from the internal resources for increasing this capacity, we need to put in some balancing equipments and also increase their production efficiencies; that has not involved any huge capital investment.

Q: Could you talk in detail as to how you were able to turn around your company in four quarters and the kind of margins that you have got at 10.2% versus about in financial year '06?

A: We have increased the productivity by certain productivity techniques and improving the technology and we have also changed our fuel. We have used alternate fuel and as market demand for high quality product is also on the increase, it needs all the international regulatory requirements. So these are the major reasons by which we could improve the margins.

Q: Do you export a significant amount of your sales to the US and Europe?

A: Our total exports is to the extent of 60% of our turnover but majority of it is going to Japan and to USA, we export to the extent of about 10% of our turnover.

Q: How much are you appreciating rupee hit you on the margin front at all?

A: That is a commercial factor, which I do not want to reveal.  

Q: Are you taking a forward cover at this point in time for any kind of rupee appreciation, which we have already seen against euro as well as the dollar?

A: We are taking 50% of our export turnover as forward cover, that has been our policy and it gives us good margins.

Q: For FY08, what is the game plan? What is it that you are targeting in terms of a topline and a bottomline performance given the last four quarters?

A: There is a problem now because of the rupee becoming stronger, it is a threat for the next few days. But that is a factor, which is going to be there and we have to improve our bottomline by improving the productivity or reducing the cost.

Q: How much of an improvement can we see?

A: Next year, I am going to maintain the bottomline at the same levels.

Q: You have said that your margins are getting impacted on account of the rupee appreciation, that is something your investors would want to know, is there any particular reason why you are shying away from answering that question?

A: My efforts to reduce the cost are continuing and I am hopeful that I can maintain the same profitability level next year also.