MD & CEO Message
The basic foundations that
make up our business are
significantly stronger. As man-
agers,we have a tighter grip on
the business and our capital
allocation strategy is better
than when we started.
I am proud to say that the year gone by has been a record year for us in many aspects. We hit our all-time highest ever revenues, volumes, EBITDA and profitability. We must also remember that this was a year of increasing costs. Freight, energy costs, packing costs, costs of auxiliaries such as SPCs, spin finish oils, chemicals, dyes, etc. went up significantly. It was especially encouraging to achieve these numbers in such a fiscal. This year was important not just for the financial records but also a few non-financial milestones that our business accomplished this year which I've highlighted below.
- This year was yet another year where we grew the volumes of value-added products such as Comfeel, Automotive Yarns, IDY, Wonderfeel, Sorona, SDN etc.
- For the first time in our company's history we been able to successfully commercialise patent pending yarns. Due to the popularity and market fitment of some of these innovations, we have been able to commercialise several of these proprietary products in an incredibly short time frame. This year we have received bulk orders (post successful customer trials) in innovations such as Synergy, Kashmere and Hygeia. We hope to add more to this list in the coming few years. This together with our value added yarns mentioned above should make our business incrementally more robust.
- We hope to add more to this list in the coming few years. This together with our value added yarns mentioned above should make our business incrementally more robust.
- Our focus on operational excellence and cost paid off this year. The Rakholi plant saw record numbers on metrics such as Waste percentage, Downgrade percentage, Packing cost per kg, Value Loss percentage, etc. In terms of absolute production in tonnage, our throughput improvement initiatives continue to deliver and the plant saw record production volumes yet again with relatively lower investment as we were able to tweak more production from the same machines. Cost initiatives in Palghar helped us significantly reduce utility consumption and conversion costs.
- We were able to successfully install new capacity in flooring yarns and are now looking to commercialise that capacity with some of our proprietary innovations and value added products
- Exports as a percent of sales continued to remain consistently around 45% and hit an all time high number.
I believe that we continue to become incrementally more robust as a business with each passing year. While we will feel the gyrations of economic cycles, I believe that the amplitude of the fluctuation of our results will reduce as we continue along our journey. While we haven’t completely transformed yet, I believe that we are closer than when we started. Our view of the competitive environment and corresponding investment decisions, too, have come a long way since we started this journey and we are incrementally outsourcing parts of the business which can easily be made by others.
As I write, however, while the cost pressures have begun to ease, slowing demand is already beginning to dent our capacity utilisations. The biggest impact is coming to us from the fact that people world over are moving their spending habits from purchasing goods to services which was artificially suppressed during the peak pandemic years. This, of course, was a tailwind for us in the previous fiscal as people sat at home and spent significantly on goods, in particular, on improving their homes. Furthermore, if we see drop in raw material prices, while this may be good for the medium to long term, this may create an impact on short term profitability as we take stock losses. Nonetheless, we continue to tirelessly execute on previously identified opportunities and discover new ones that will help us to maintain or increase our base of earnings
- We have committed capacity expansion in some of the value added products named above with customers expecting us to increase volumes. We hope to commercialise this additional capacity towards the end of H2. We have also geared up sales/marketing efforts in these areas and hope to widen our net.
- One of the key challenges in the coming year will be maintaining capacity utilisations in an atmosphere of slowing global economy. As I write this letter, utilisations are down 10% and one of the biggest priorities this year will be to find business with which we can fill this gap.
- Needless to say, moving up the pyramid of specialisation is a continuous goal for us at AYM. We continue to work on identifying new niches in and around the market areas that we operate in. We hope to introduce some new products in the technical area this year through new capacity (and capability) that we hope to commission this year. Our interest would be to find more such small to mid size opportunity baskets which might not be sizeable enough to attract some of the larger low cost players but are significant in size and margin accretive for us
- the technical area this year through new capacity (and capability) that we hope to commission this year. Our interest would be to find more such small to mid size opportunity baskets which might not be sizeable enough to attract some of the larger low cost players but are significant in size and margin accretive for us
- Despite rising margins in the commodity segments of business last year, we maintained the discipline to not add any capacity in areas which are not strategically important to us. However, in this area, too, we have a roadmap to increase margins by using the same equipment to make more premium and niche products within the sphere of commoditised business. This is a dormant opportunity that we hope to capture over the next couple of years.
- While we continue to do incremental de-bottlenecking, we don’t expect to make any large capex commitments over the next 12 months which will be in excess of our internal accruals. With inflation at what we hope is the peak, our working capital commitments too should come down this year. I therefore expect to see moderation in our overall net debt levels over the short to medium term. added products
We have come a long way since we started our journey in 2015. Furthermore, the heartening thing to note is that we continue to have high ROI improvement opportunities. This means that as we execute on these low hanging fruits, our bottom line and ROE can look vastly better. The basic foundations that make up our business are significantly stronger. As managers, we have a tighter grip on the business and our capital allocation strategy is better than when we started. As we make further progress on this journey, we hope to be more in control of the profitability as opposed to wildly swinging with market cycles.
I would finally like to end this letter on a note of thanks to all our shareholders, who have continued to support us through this journey. Finally, I would also like to thank all of our employees for continuing to believe in our vision and working tirelessly towards it.
- Abhishek R Mandawewala
MD & CEO