The Hindu Business Line : SKM Egg Products in expansion mode

BUOYED by the increased price realisation for processed egg products in recent months, the Erode-based SKM Egg Products Export (India) Ltd is seeking to consolidate its working by going in for need-based investment that would enable it to enlarge its manufacturing capacity and bring down the cost of production.

SKM Egg Products, a 100 per cent EOU, which recently came out from its outstanding debts (high costs debts) from IFCI through the one-time-settlement (OTS) route, is seriously looking at bringing down the cost of finances on working capital, new investments and reducing the cost of power to optimum levels.

While a captive power generation project is being mooted as a new investment intended to bring down the company's power cost from the present 6.5 per cent of its production cost to below 4.5 per cent, SKM Egg Products is also working on a proposal to set up its own layer egg farms that would meet at least 60 per cent of 9 lakh eggs being consumed by its egg processing plant every day.

The idea is that to insulate the company from the fluctuating shell egg prices which is presently being procured from contracted layer egg farms.

Considering the potential for egg white or albumin products, SKM Egg Products is also planning to upgrade its powder treatment technology which too would result in reducing the product cycle time.

With substantial export orders in hand to keep its plant busy till the end-April, SKM Egg Products would also require to handle additional egg-white processing capacity to the extent of 20 lakh eggs per week over and above its present in-house production level of 55 lakh eggs a week.

``The current export market demand is such that the company has to now find additional processing capacity and whether it should seek to get this from outside through hiring a capacity is a point to be decided,'' said Mr Shree Shivkumar, Executive Director of the company.

The outlookfor an increase in sales and higher international prices for processed eggs this year has buoyed the company's marketing strategy. SKM, which clocked Rs 46 crore turnover with 2,600 tonnes of processed eggs production in 2002-03, is hoping to close the current fiscal with a 6 per cent growth in sales at around Rs 49 crore with production expected to touch 2,800 tonnes. The plant is expected to do 70-75 per cent capacity utilisation this year.

``We find the current market demand for egg products, especially from the Southeast, Asian and Far East markets mainly due to the `avian flu' outbreak in the region will throw greater demand for our company's products with better prices,'' Mr Shivkumar told Business Line. ``We have a technology tie-up with a Belgian company, Belovo, which also assists in our marketing efforts. We have sought to expand our overseas marketing network further with Belovo which has its own dealer network in countries accounting for huge processed egg consumption,'' said Mr Shivkumar. SKM may also seek to extend its tie-up with Belovo beyond the agreed tenure of 2007.

As for the finances of the SKM, post-OTS settlement, the company's financial commitments to the IFCI outstandings were fully met in October last when the company paid its last part of the 10-instalment restructured loan repayment schedule.

It had to clear off Rs 25.85 crore outstanding loan with IFCI at terms agreed under the OTS. SKM Egg Products' profitability had kept rising since 2001-02. Its net profit that year was Rs 3.83 crore and it went to Rs 5.07 crore in 2002-03.