Freshtrop Fruits Ltd Management Discussions.
The discussion hereunder covers the financial results of Freshtrop Fruits Limited for the financial year 2018-19 and its business outlook for the future. Certain statements in the Management Discussion and Analysis Report section may be forward looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of the future performance and outlook.
GLOBAL SCENARIO FRESH FRUITS
Fruit constitutes a significant part of human nutrition and are highly recommended for a healthy, vitamin-rich diet. International trade in fruits and vegetables has expanded more rapidly than trade in other agricultural commodities, especially since the 1980s as remarkable technological developments in postharvest management have expanded its dimensions.
The role of emerging economies in global agricultural markets has increased since 2000. Higher agricultural productivity and exports has resulted in reducing poverty and increasing per capita income in these countries. Worldwide, more than 675 million metric tons of fruit are produced each year. The most popular fruit varieties are bananas and apples, followed by grapes and oranges. Largest fresh fruit exporter is USA followed by Mexico which has overtaken EU in the past decade. India is the second largest producer of fruits in the world. It contributes 9.54% of the total fruit production of the world. The global fruit and vegetable processing market is expected to witness a compound annual growth rate of 8.3% during the forecast period (2018-2023).
Global fruit processing market growth has been influenced by ready-to-eat food products, especially in the developed and developing nations in the recent years. The changing lifestyles of the consumers and increasing per capita income is anticipated to fuel the sales of fruit processing products. Moreover, governments of the developing economies are supportive of the small and medium enterprises by providing different loan facilities at lower interest rates and has also helped to build necessary infrastructure. This factor will play a major role to boost the market growth in developing countries.
The processed fruit segment is 65% of fruit and vegetable processing sector, by market share. The processed fruit and vegetable sector include frozen, canned, dried fruit & vegetables and others. There is a high consumption of frozen fruits and vegetables in the United States and Canada. However, due to the increasing health awareness, consumers are expected to shift toward fresh produce in the long run.
The global fruit & vegetable processing market will be estimated to reach USD 346.05 Billion by 2022, whereas. The global fruits and vegetable processing market is expected to witness a compound annual growth rate of 8.3% during the forecast period (2018-2023).
Summary of last three-year export of fresh fruits and proceed fruits and juices
|Processed Fruits, Juices & Nuts||300006.44||249270.25||317353.16||264784.10||339606.52||280496.58|
INDIA SCENARIO FRESH FRUIT
The Indian government has taken many steps since the last few years to boost agriculture production and agricultural exports. Hence the agriculture sector had a growth rate of around 2.7% in the last 10 years. As per data published by National Horticulture Database published, India produced 92.9 million metric tons of fruits.
The vast production base offers India tremendous opportunities for export. During 2018-19, India exported fruits worth Rs. 4817.35 crores - 692.01 USD Millions. Grapes, Pomegranates, Mangoes, Bananas, Oranges account for larger portion of fruits exported.
Indian Export (Grapes / other fruits) summary for financial year 2018-19 are as under
|Products||Quantity (MT)||Value (lacs)|
|Other Fresh Fruits||3,72,213.73||1,83,457.17|
The Indian food processing industry is primarily export orient. Indias geographical situation gives it the unique advantage of connectivity to Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea.
India has strong a footing in agriculture, it provides a large and varied raw material base for food processing.
Recently there is a good demand of processed food products like frozen pulps and vegetables, frozen dried fruits and vegetables, fruit juice concentrates and canned products. The major items of export by India are fruit juices, pulps, jams, pickles and chutneys, canned fruits & vegetables, concentrated pulps and juices, dehydrated vegetables, frozen fruits, frozen pulps and freeze-dried green pepper.
Indias exports of Processed Food were Rs. 31111.90 Crores in 2018-19, which including the share of products like Mango Pulp (Rs. 657.67 Crores - 93.97 Millions USD), Processed Fruits, Juices & Nuts (Rs.2804.97 Crores - 402.52 Millions USD).
1. INDUSTRY STRUCTURE AND DEVELOPMENT: FRUIT PROCESSING:
Fruit processing industry in India is increasingly seen as a potential source for driving the rural economy as it brings about synergy between the consumer, industry and agriculture. The government on its part has initiated extensive reforms, some of the key measures undertaken by the Government include amendment of the Agriculture Produce Marketing Committee Act, rationalization of food laws, implementation of the National Horticulture mission etc.
The demand for processed and packed food continues to be growing in response to changing demographics, evolving preferences for branded and convenient items, retail and food sector modernization and increasing health consciousness.
FRESH FRUITS EXPORTS:
India is an agrarian economy, more than 52 percent of the land area is considered arable. its diverse agro- climatic conditions allows production of wide range of tropical and temperate fruits. Other factors that makes Indian horticulture a promising sector from the angle of global competition, is reasonably low Labor costs. Fruit production in India, is practiced over an area of 3.79 M hector. Varieties of fruits are grown in India viz. Mango, Banana, Citrus, Guava, Grape, Pineapple and Apple are major fruits.
The productions of fruits during the year 2018-19 are 97.35 MT fruits as compared to 94.88 MT in previous year.
The major destinations for Indian fruits and vegetables are Netherlands, UK, Russia and Saudi Arabia. Though India is known as fruit basket of the world, its share in the global market is still only 1%.
2. OPPORTUNITIES AND THREATS:
Grapes are commercially an important fruit in India, it is one of the most consumed fruits in the world due to several health benefit such as low in fat and high in fiber, B1, B2, B6, Vitamin K and Potassium.
Various initiatives are being taken by the government, grape growers and exporters to develop new varieties of grape both domestic and the international markets. Indias grape exports rose from 92,286 tonnes in 2017-18 to 1,21,469 tonnes in 2018-19 and is expected to grow further in the coming years.
The demand for processed and packed food continues to grow in response to changing demographics, evolving preferences for branded and convenient items, retail and food sector modernization and increasing health consciousness and one of the major reasons for rise is due to the growing penetration of organized retail in the country.
THREAT / CHALLENGE
Grape is grown under temperate conditions and requires adequate and planned irrigation, as the weather is unpredictable, and the irrigation system are not fully developed the production still depends excessively on the vagaries of nature.
Despite continued efforts and initiatives of the Government to provide the required stimulus to the sector, processing activity is still at a nascent stage in India. A combination of uncontrollable and controllable factors have affected the growth of the sector and has acted as a hindrance in achieving its potential. The controllable factors are quantity of raw produce, low labor productivity and slow adoption of technology, whereas uncontrollable factors include fragmentation in of land holdings which have resulted in lack of scale and has made investments in automation unviable; regional climatic variation which impact production; and the constraints in land availability.
Biggest challenge in processed food exports is huge competition from global leaders, frequently changing technology and international laws affect the food processing industry. Further the costs of Research and development is very high.
3. SEGMENT WISE PERFORMANCE
The Company has identified following segments as reportable segment
1. Fresh Fruits
2. Food Processing
Details of segment wise performance are given at respective place in this report.
4. FUTURE OUTLOOK
India enjoys a rich diversity of horticultural crops covering large groups of fruits and vegetables. Fruits and vegetables together contributed 90.2 per cent of this production and 65.8 per cent of the total area.
The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage.
As the digital literacy rate in India is growing, the demand for organic food in India will see good growth, it was increased in double-digit during 2013-2019.
The government of India has launched several initiatives to support production of fresh food and increasing consumer awareness by educating consumers about fresh food.
Further, Food processing industry in India is a sunrise sector that has gained prominence in the recent years. Availability of raw materials, changing lifestyles and appropriate fiscal policies has given a considerable push to the industrys growth some of the key measures undertaken by the Government include amendment of the various food Acts, private and foreign investor 100% allows in the food processing & cold chain infrastructure. Further availability of cheap labors, government subsidiaries, convenience of transportation facilities and changing in consumption pattern driven faster growth in the food processing sector.
5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The company has adequate internal control systems commensurate with its size and operations to ensure orderly and efficient conduct of business while safeguarding the assets, quality, safety, procurements, finance and accounts and reducing and detecting error.
6. RISK & CONCERNS
Risk Management is a critical exercise for all organizations, particularly it with the agricultural sector which is uncontrollable as it depends on weather. However, the main aim of risk management is to identify and analyze the risks through a structured Risk-Benefit Analysis as and mitigate those risks which are not beneficial to the organization.
7. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
The financial performance of the Company is described in the Directors Report under the head "Financial Result" and "Review of Operations".
8. MATERIAL DEVELOPMENT IN HUMAN RESOURCES AND INDUSTRIAL RELATION FRONT
The Company routinely undertakes employee development activities keeping in mind the professional requirement of the employee as well as the growth of the company.
The Company has embarked on the path to formalize its CSR commitments and is perhaps the only company in India in the fresh produce export sector to move in this direction. This is not only going to result in the better integration within the supply chain but also offer a significant competitive edge in marketing our products in the developed markets across the word.
The industrial relations were cordial throughout the year with no incidence of strike or lockouts.
Statement in the management discussion and analysis describing the companys objectives, projections, estimates, expectations and other may constitute "forward - looking statements" within the meaning of applicable securities laws and regulations. Actual results may differ from those expressed or implied. Several factors that could significantly impact the companys operations include economic conditions affecting demand, supply and price conditions in the domestic and overseas markets, changes in the government regulations, tax laws and other statues, climatic conditions and such incidental factors over which the company does not any direct control.
The company undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Reference: Ministry of agricultural government of India, Agricultural and processed food products export development (APEDA), Media report, journals and press release: informatics journal, Business wire news journal, The Federation of Indian Chambers of Commerce and Industry (FICCI), National Horticulture Database.