Sep 23, 2010, 04.15 PM | Source: CNBC-TV18
Export oriented coffee manufacturing company, CCL Products is not only expecting to be a debt free firm by next year but is also looking at upping their turnover by 15% in FY11.
Below is a verbatim transcript of his interview with CNBC-TV18’s Reema Tendulkar and Gautam Broker. Also watch the accompanying video.
Q: As a coffee manufacturer and an export leaning company where 97% of your revenues come from the export market that had taken a bit of a hit over the last two years. What is the kind of improvement you have seen in exports?
A: The last two years due to the recession we have taken a hit but now the volumes are expected to increase year on year. We are expecting at least 10-15% growth year on year from now onwards.
Q: You did about 8,500 tonne in FY10 what are you expecting in the current year?
A: In the current year we are expecting around 10,500 tonne at least.
Q: You also said that you are seeing good volume growth. Is it likely you might see any increase in price realisations?
A: Unusually there wouldn’t be a significant increase in the price realisations because the kind of business over here is completely different. We work directly with the distributors and we cannot expect the kind of margins that you would expect if we had our own brand.
Q: Since you are a big exporter, a major chunk of your revenues come from exports. How are the export markets looking as they weren’t looking very good. Are you facing a bit of a slowdown?
A: The demand is looking very good. In 2008 what we have seen is most of our customers have started reducing their inventory levels but now they have started placing the orders. We already have confirmed orders for than 10,000 tonne for this current financial year itself.
Q; Are you looking at any more brand launches maybe targeting at the domestic markets to increase your sales over here?
A: Yes. We are planning and launching our own in-house brand in the domestic market. We are doing some test marketing right now. We should be able to launch in the next three months or four months maximum.
Q: What kind of a market share do you enjoy in markets abroad?
A: The international market is more than 400,000 tonne so at the end of the day we are a small player but we are the single largest manufacturing unit which has all three different types of instant coffee products. So that is one of our biggest advantages.
Q: Is there any debt that you are currently sitting on?
A: Yes. Right now we have finished our expansion at CCL India couple of years ago. We have a debt at about Rs 65 crore which should be repaid by next financial year latest.
Q: You had expanded your facility in FY09 to about 22,000 tonne and are expected to do volumes of 10,000 so you are operating at low capacity utilization?
A: No. The coffee business is again very seasonal. In the third and fourth quarter usually that is when we have the maximum demand. The first and second quarter usually has very low demand. So we need a higher capacity in order to meet our requirements in the third and fourth quarter. That is why we had to increase our capacities three-four years ago itself.
Q: You do not have any plantations so you are pretty depended on buying green coffee which is predominantly your raw material. That said what would your be your margins that you are expecting this year?
A: Our margins have always been consistent and even this year we will be operating on the same margins. We are not a commodity trading company. What we do is we take the current green coffee prices and give offers to our customers. The contracts are entered into on a daily basis depending on the customer requirements. We don’t enter into any kind of speculation with respect to the increase or decrease in coffee prices.
Prakash Gaba of prakashgaba.com is of the view tha
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