SKM Egg eyes Russia entry, sees better H2 than H1

In an interview with CNBC-TV18, S Raghuraman, CFO, SKM Egg Products gave his perspective on the quarter gone by and the road ahead.

Below is a verbatim transcript of the interview. Also watch the accompanying video.

Q: For the company per se, there has been good growth in terms of revenue. For the quarter also which went by, there has been a 45% uptick. But is the profitability which has been declining and now in fact you have been posting losses when do you expect a turnaround and the company to post a profit?

A: Before the end of this year we are expecting to show some profit.

Q: How much would it be?

A: We cannot say because now there is improvement in international prices and so we are hoping that in H2 (second half) our performance will improve further.

Q: Could you expand a bit on the egg prices and what sort of pressure are you facing on the operating front?

A: The egg price has gone up. Today it is ruling at Rs 3, but we are also having our own poultry farm that is compensating to some extent. The international prices of egg powder is also showing some improvement.

So these two together have combined to give us good revenue from our own poultry farm, because we have our own birds etc which is also contributing to our revenues. So that is why during the second half we hope to show some improvement in the financial results.

Q: Have you hiked prices throughout FY11 because of the rising raw material prices? How exactly have you combatted this?

A: We are having a discussion with our overseas players and we are also expanding our wings. We are also planning to enter into Russia and other markets also where the volume is huge. So we are also expanding our wings.

So everything will contribute once we enter into new areas. It will take a few months to cash on that. So that is why during H2 we are hoping to at least arrest our losses.

Q: So is the worst over for the company? In terms of profit do you think you will surpass last year's Rs 1 crore profit that you all posted for the entire year?

A: That is not possible because this year when compared with H1, our H2 performance will be better. That is what we are hoping for and we are working on that.

Q: On the topline front you haven't done too badly. You have shown a growth on half yearly basis as well as for this quarter in particular, where exactly is this growth coming from?

A: Ours is a 100% EoU (export oriented unit) because we have very good volumes, overseas there is very huge demand. But because of international prices, we are restricting our operations. Now once the profit margin is there definitely we will operate to the fullest capacity.

Q: Currently what capacity are you all operating at?

A: At about 80-85%. We can operate upto 100%. That is not a big problem. But only now there is a slight improvement in international price. So we are increasing our production.

Q: You spoke about entering different markets like Russia. Could you give us an update on how Europe and Japan are doing. You are already present there. What sort of plans do you have in terms of Russia, when do you plan to enter it and what is the amount of investment you are looking at?

A: We are making initial studies. Once we enter the overseas market, it will take a few months. So initially we are seeing what is the market situation etc, we are just studying that and once we are convinced then definitely we will enter into Russia.