CRISIL estimates that overall cotton yarn demand (volume terms) will grow at a slower pace of 4.5% in fiscal 2020 compared with 5.6% last fiscal. The slowdown will be mainly driven by tepid growth in domestic demand (comprising three-fourths of overall demand) at 2.9-3% in fiscal 2020.
Growth in exports is also expected to be slower at 9-10% in fiscal 2020, compared with 13.5% in fiscal 2019, amid trade tensions between US and China, and commissioning of yarn capacities in Vietnam, which enjoys preferential access to Chinese markets. “This is not good news for Indian spinners,” said Hetal Gandhi, Director CRISIL Research.
CRISIL thinks that lower cotton production is expected to shrink India’s cotton stock to a two-year low of 1.2 months by the end of CS 2019, leading to firming up of domestic cotton prices to Rs 128-140 per kg this fiscal, marking a rise of 7-8% over fiscal 2019.
"Global cotton prices, meanwhile, are expected to remain steady at Rs 128-134 per kg as lower production in India, US and Australia will be offset by higher production in China and Brazil. This would narrow the gap between domestic and global cotton prices. Demand for cotton yarn is also seen turning south due to moderation in domestic as well as exports demand," the release mentioned.
“The credit profiles of spinners are not expected to be impacted materially, as capital spending is likely to remain moderate given current capacity utilisation levels of ~75-80%,” said Gautam Shahi, Director, CRISIL Ratings. “Spinners are also expected to continue managing their working capital prudently.”
Besides, strengthening of balance sheets owing to healthy demand and softer cotton prices, and moderate capex in fiscal 2019 will help spinners absorb impact of lower operating profits in the current fiscal. However, small cotton spinners (spindles less than 20,000) with leveraged balance sheets could face some challenges because of higher cotton prices.
“Higher cotton cost and moderate demand outlook mean they may not be able to get commensurate increase in yarn prices, which would reduce their operating margins by 100-150 bps in this fiscal.” CRISIL rates 309 cotton spinners. Considering lower profitability, Debt/Ebitda (earnings before interest, tax, depreciation and amortisation) of CRISIL’s portfolio is expected to be 3.5-4 times in fiscal 2020, compared with ~3.5 times in fiscal 2019 and 4.6 times in fiscal 2018.
Helpful tool is important for farming.
When farming, we can't miss to control weeds and pests. Also fertilizing is very vital to the growth of plants. Then many farmers must need high pressure spray hose to help. By the way, good hose fittings ease job a lot. Farmers don't have to change fittings wasting time. If so, there's also with hose crimping tool to help connecting hose to fittings. As for normal hoses, small portal crimping tool is enough to work. Farmers can do job in their fields without wasting time to go back to the store.