Avanti AGM Notes
Chairman Speech is attached below.
Lot of research and work goes on maintaining and improving quality.
We had small capacities in start, but we kept increasing capacity at great quality.
Along with TUF, we are working in new products with reducing fish meal and better FCR.
- It cannot happen suddenly, as lot of work is needed and quality is more important than anything
- We have been able to reduce the fish meal intake but still working.
March 2018: The 1.75 lac capacity will go commercialisation
Processing plant is complete and in operation and should do commercial production by end of this month.
Requires a lot of permissions as it is food product. HACCP and all permission have been received.
Reasons for growth and increasing market share of Indian shrimp:
- Vietnam and Thailand effected by EMS and still recovering
- China net importer. This has contributed the most.
- Indian quality is better than Ecudor or Indonesian shrimp. Eucoder is just near and gets transport benefits.
- India is growing well, new farms are coming up, new areas are coming up. Have huge costal line (only 14-15% used), reached 5lac tonnes. Easier 20-25% growth on 2lac than on 5lac. Cultivation area may grow at 5 or 8%.
- Indian companies are focusing on quality. Avanti - Devi and others, we sell directly to customers and this requires lots of certifications and best standards. To supply to wall mart and retail customers.
- In India, the companies are taking it seriously. We are working on sustainable model, we want to be reliable partners and top 10 companies are working on it. We as India want to be preferred suppliers.
- Things should be good except for unknown external circumstances.
When industry is growing, there are many who run after profits.
- We want sustainable model.
- We are educating farmers to not use antibiotics. Someone comes and explains them, and they believe it. We meet farmers. AP government has banned use of antibiotics in aquaculture. They should ban the manufacturers of antibiotics.
- We did extensive propaganda to not use antibiotics. We showed the dangers of using antibiotics and that they would get good price by not using it. But sometime they cut corners and use them.
- We are making representations to CM of AP and other departments. They are conducting village seminars
- This is a trade barrier. Europeans want their products to be imported at lower duties in India. This is also a trade negotiation.
- Industry has to survive and thus we are working on it. We are part of the team. We are really working.
Farmer is very sensitive to quality of feed.
- He puts lac of rupees in farms, he closely monitors daily growths and FCRs. They need quality product.
- They put feed in pond water and closely monitor the quality. They too want profits. Avanti’s feed is a pull.
- We want our shareholders, our farmers and our employees to be happy.
We diversified into power plants in 2006-07. Not now. That time power sector was cream.
There are half a dozen global feed companies in India.
- We are competing against them and able to sustain
- Logistics is a problem in export and so is import duties
- We are working on small quantities for export.
- Fish industry is very large globally. Saloman and all are high value items and they are not here.
- We are working on it. So we are focussing on India.
We are also selling to importers as well as retailers. Retailers is 85%.
Sustainability of margins:
Current EBITDA margins are exceptional due to weak RM prices but given the kind of volumes AFL is doing, 15% EBITDA margins in feed may be sustainable ( vs 10-12% in previous years)
If RM price increases, we won’t increase. We can’t change price everyday.
If soya bean goes back to 50, we would have to take the burden.
- Fell short on feed capacity by ~15000 MT in the last quarter. Lost ~Rs 1000mn of sales in the quarter.
- Current market share is ~43% and the company is aiming for 50-55% share in next 2 years.
- Soloman is a cold water specie. That kind of water and weather is not in India. Similarly, shrimp grows well in warm water. That is the benefit of India.
- Red Lobster is a 49% subsidiary of TUF. Chickes of Sea is also 100% subsidiary of TUF. Thus TUF has a huge retail network. We should get good realisations in processing.
- For real value addition, the skilled labor is very hard to get. They are not regular and not very passionate. For example, it took 3 years to just get the labor to wear the masks.
- Unskilled labor is generally available.
In talk with Finance Head:
- There is a very different culture in Avanti. The MD talks to every head multiple times a day. He is aware of all the employees. He would ask us to cautiously develop good team and provide suggestions. He would ask us to let employees go early at-least 2-3 days a week. He sees everything and has developed an amazing culture here.
- Both the sons of MD have been developed form bottom. One has got 2 years training in TUF. He is very good in doing international deals and customers. The elder one looks after the operations very closely.
Chairman speech 2017.pdf (394.0 KB)