Phoenix Yule adds value to tackle rising input cost

The Indian belting industry is moving towards value added products even as the sector strives to cope with rising costs of inputs like natural rubber, steel and nylon cords, carbon black and rubber chemicals.

"Belting manufacturers have to move towards value added items to improve per unit realisation and margins, and the improved products deliver greater benefits to users as well", T K Mukherjee, managing director of the Rs 100 crore Phoenix Yule Ltd (PYL) told Business Standard.

Mukherjee said the biggest hit had come from the over 50 per cent surge in the cost of natural rubber irrespective of origin, and over 20 per cent rise in the cost of synthetic rubber.

Prices of commodities like rubber chemicals, carbon black, fabrics and steel cord had risen as well, but at a relatively modest 8-10 per cent year on year between fiscals 2002-03 and 2003-04.

The inputs are common to the belting sector and the tyre industry.

The company, the sole manufacturer of steel cord belting in the country, recently launched a pipe conveyor belt as a value-added product.

The product reshapes a specially made material handling belt into a pipe through a series of rollers so that materials can be conveyed across long distances and hostile environment without exposure to the elements or loss from spillage.

For the user, this means a material handling solution with greater carrying capacity and elimination of hazards.

Users like power stations, cement units and bulk materials can eliminate the hazards caused by the dust of the materials they use and produce through adoption of this value added product.

While refusing to name the company, he said major cement unit had recently established the viability of the product by shifting transportation of polluting materials from truck-based containers to a belting system.

PYL was able to develop the product because of the support it received from its parent, Phoenix AG of Germany, one of the largest makers of conveyor belt systems in the world.

PYL used the relationship to become a major exporter of textile-based belts to Phoenix buyers in USA, South Africa and Australia.

In addition, PYL had become a globally integrated supplier of other specialised products like heat resistant belts to replace imports.

High-technology, application-based products were also being taken up with Phoenix AG support.

Belting companies like PYL were now insisting on supply contracts and long terms delivery agreements with a purchase price variation clause that would allow the seller to pass on at least part of the burden of rising raw material prices to the purchaser, he added. It was not enough to rely solely on value added products.

To improve its client servicing capabilities, PYL had also invested in a pollution-proof fly-ash handling system in preparation for applying for ISO18001 certification to establish the environmental friendly nature of its plant at Kalyani in West Bengal.

In addition, it was investing in a basic rubber mixing machine to improve its mix quantity and quality. This would create reserve capacity for downstream expansion and permit PYL to sell specialised compounds to buyers like tyre companies.