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Sarla Performance Fibers Limited (SPFL) - From the desk of the Managing Director
 
 
From the desk of the
Managing Director
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Dear Shareholders,

Greetings to each one of you and thanks for steadfastly remaining with us in one of the most difficult years since inception. We will soon usher into a new growth phase after the last 2 years of struggle as these years also brought a lot of learning with them. We have used this phase to create new opportunities in core business and the benefit of that will be felt in the form of increased earnings, expansion and dividend.

Let me give you a little back drop from what we laid out as a priority last year. We talked about maintaining sales, keeping tight control over costs and maintaining cash flow. I am happy to inform you that we exceeded these and did some more as well. As we get into the habit of creating positive surprises for ourselves the barriers to growth will come down.
Krishnakumar Jhunjhunwala

Our outsourcing model for supply of polyester/nylon threads to large garmenting and fashion companies globally has continued to strengthen. As you will see from our performance, even though volumes are down the increase in selling prices helped our profits. The increase in selling prices was a direct result of new value added products, and working closer with large customers.
Another good thing that I must share with you is that our experiment with setting up of JV unit in Honduras – Central America in 2005 has turned into a very profitable decision. Our goal was to work near the customer to customize his needs and source from India so that we can make a reasonable return on our investment. In the pursuit, we have cumulatively earned Rs 10,114.11 million in revenue and profits of Rs 884.59 million over the last 17 years. Return on investment of a whopping 88%! This has given us the confidence to explore and set up similar arrangements in other parts of the world. Some of these will start showing results from current year.

To serve growing needs of some of our large customers we have expanded dyeing house last year which is now much more sophisticated than before. Dyeing is a very critical part of our business and will greatly contribute towards providing further value addition. Some other investments have gone into new machines and warehousing.

Over the past 5 years our consolidated revenue growth has been 24% and earnings growth 14%. Barring unforeseen situations, we should come back to a more normal growth this year. While our effort is to always reduce dependence on external factors I must caution that we cannot be completely ‘decoupled’ with the actual situation globally. Compared to past we have emerged better on sales, product mix, cost control and so on. However, a lot more is to be done if we have to work and grow with the giants in apparel, inner ware and specialized clothing business. Taking a leaf from the book of very successful pharmaceutical and auto part companies if our outsourcing has to attain scale it will need superior processes. We are taking the help of a renowned global consultant to prepare us on this aspect beginning this year.

First time investment in wind power energy was made last year, which is our little contribution to the environment. It also made good sense to us to invest some of the surplus cash flow and secure the power requirements. With strong earnings and a minimal debt free balance sheet we have a solid future ahead of us. I share the feeling of many of you that we have not been accorded a deserving market value for our good work given the lackluster state of textile sector as a whole. I am sure over the long term shareholder returns will only improve from the present levels because our strong performance and growing size cannot be ignored for too long. 

Regards,
Krishnakumar Jhunjhunwala
 
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