MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Pursuant to Clause 49 of the Listing Agreement, a Management Discussion & AnalysisReport covering segment-wise performance and outlook is given below:
(A) Industry structure and developments 2010
The lubricant industry in India is broadly divided into three major market sectors:Automotive, Industrial and Marine & Energy applications. The industry is led by fourmajor players (Castrol India Limited, Indian Oil Corporation Limited, Bharat PetroleumCorporation Limited and Hindustan Petroleum Corporation Limited) who contribute toapproximately 70% of the market. There are numerous players, including global players,operating in the remaining 30% of the market, leading to a highly competitive scenario.
The automotive industry saw very good growth in 2010. The growth was across categories,with the passenger vehicles segment growing by over 29% and the commercial vehiclessegment growing by 28%. It is believed this upward trend will be sustained in theforeseeable future due to a strong domestic market and increased thrust on exports.
The luxury car segment has taken off substantially in the last three years and currentdata suggests demand will be sustained in the long term. Additionally, the automobileindustry is yet to fully tap into demand from rural areas but most Original EquipmentManufacturers (OEMs) are targeting the rural customer and there has been a gradual butsteady growth in demand for passenger vehicles from these areas. Rural markets and theluxury car segment are expected to play a significant role as the Indian automobileindustry seeks to double total sales over the next decade.
India is truly emerging as a global hub for compact cars with almost every OEM wantingto have a presence in this segment. Interestingly for Castrol, its global partners Fordand Volkswagen successfully launched their small car offerings Figo and Polo in the Indianmarket.
Castrol extended its strong partnerships with leading automotive OEMs by tying up withSkoda India. This tie up will benefit the synthetic segment of our portfolio. With moreglobal OEMs coming into India, this trend presents us with strong partnershipopportunities in 2011 and beyond.
Major industry developments
1. Economic scenario
The global economy has seen a revival with the outlook across North America and Europeimproving. While growth continues to be strong in Asia, many countries, including India,have seen inflation rising and emerging as a threat to the growth outlook in the mediumterm. To combat inflation, driven by economic recovery and rising commodity prices, theReserve Bank of India has continuously raised interest rates.
In India, inflation has now spread from agricultural commodities to manufactured goods,with the outlook remaining at an elevated 7-8%.
On the back of a global recovery, exports from India are up and employment outlook isstrong, putting more people into the job market and providing more purchasing power toprospective vehicle owners.
While demand for automobiles continues to remain strong, rising commodity prices andinterest rates could temper growth rates. Most forecasts for automobile sales rangebetween 12-16%.
2. Crude oil
The buoyancy in crude oil prices was the key economic driver in 2010 for lubricantinput materials. The supply and demand dynamics in favor of the latter also influencedsignificant inflation in input materials. The year saw considerable fluctuation in theforeign exchange rates of the US Dollar versus the Indian Rupee and as a consequence,price stability was short lived.
The graph below depicts the trend of crude prices and the exchange rate between the USDollar and the Indian Rupee in the year 2010.
The Asia and Pacific region has seen a robust growth in the demand for base oils, ledlargely by China and India. A number of refinery shutdowns in the region, planned andunplanned some for prolonged periods, put pressure on supply. This coupled withrising crude price, put pressure on refining margins and resulted in prices of base oilsmoving up by over 25% during the course of the year.
While the performance additives and chemicals category witnessed more than a doubledigit hike in prices on account of growing demand and rise in crude oil prices, the impacton commodity chemicals, solvents and refinery products was significantly higher at 35%over the last year.
Unseasonal rains in most parts of the country leading to crop failures created a demandsupply imbalance in dependant commodity categories such as vegetable oils and derivatives.A rising trend in steel prices also impacted prices of metal drums adversely.
Your Company recognized the challenge of inflation and has kept a strong focus onstrategic sourcing decisions. These included creation of alternative sources of supply, afocus on value engineering and working closely with key supplier partners. There was aconsiderable focus on value based inventory management which helped achieve balancedservice and cash release.
Market behavior and outlook
Automotive sector outlook
The automotive lubricants sector can be segmented as per the following vehiclecategories:
(a) Trucks, tractors and off-road equipment mainly diesel engine oils
(b) Passenger cars mainly gasoline engine oils
(c) Motorcycles and three wheelers two stroke and four stroke oils
1. Market growth: The year 2010 was a year of robust recovery for theautomotive lubricant market. The market is estimated to have grown volumes by 4-5%. Thishas been led by growth across categories, but primarily by the increased four strokemotorcycle and passenger car sales, recovery in agri-driven lubricants consumption and agrowing new generation, high technology, truck segment. These trends are expected tocontinue in 2011. The old generation truck market and the two stroke motorcycle lubesmarket are projected to continue declining.
The building & construction segment and the mining segment, feeding theinfrastructure sector, are also expected to continue growing at a fast pace. Thus,lubricant consumption is projected to grow robustly in passenger cars, four strokemotorcycles, building & construction equipment and mining sectors.
The monsoon in 2010 was substantial. Given good monsoon and extended winters, it isexpected that better ground levels of water would facilitate a good summer agricultureseason. Overall in 2011, the lubricant market is projected to grow at around 3-4% involume terms.
2. Channels: With the burgeoning growth of the vehicle industry, especiallypassenger cars, two-wheelers and micro LCVs (Light Commercial Vehicles), almost alldistribution channels have seen a growth in recent times. While the traditional retailchannel continues to be dominant, OEM dealerships and authorized workshops registered afaster pace of growth on the back of higher vehicle sales and higher retention period ofvehicle servicing at the OEM authorized workshops. However, since the growth in the numberof workshops continues to lag the growth in vehicle population, the small independentworkshops have also been witnessing a rapid pace of growth. The historically dominantchannels, like petrol stations, continue to decline and are no longer a dominant channelfor the industry. This trend is expected to continue.
Organized retail and the entry of global retailers, which have had a minimal impacttill date, are expected to gradually pick up pace over the next few years, subject tochanges in Foreign Direct Investment (FDI) norms in retail.
3. Competitive activity
The competitive situation remains largely unchanged with all major internationallubricant players having been present in the market for several years now. Despitecompetitive activity increasing in the latter half of 2010, your Company continues to bethe leading brand in the retail sector, followed by the public sector brands. However thesmaller players have been competing aggressively with lower prices and higher salespromotions to gain market share.
Castrol continues to be a major player in the automotive lubricant market and holds avolume market share of approximately 20% in the overall market, according to internalestimates.
Non-Automotive sector outlook
The Indian Manufacturing Industry is poised for a sustained period of high growth.Industrial output, measured through the General IIP (Index of Industrial Production) hasshown impressive 10% growth during 2010. Industrial production is also expected to grow ata healthy pace during 2011 and 2012. The growth will be driven by rise in both consumptionand investment demand.
Rise in income of urban consumers, higher income in hands of farmers, laborers andindustrial workers and record capacity additions across industries are some of the keyfactors that would drive the demand for consumables and the industrial production duringthe next two years.
In the automotive sector, production of passenger car and the two wheeler segments isexpected to grow in double digits driven by rising income levels, easy availability offinance and new model launches. Increase in industrial production and domestic trade,along with a faster growth in road construction is also expected to fuel the demand forcommercial vehicles. Overall growth in all the segments of automobiles is expected togenerate good demand for automotive components. Commissioning of significant investmentprojects and the healthy order books is expected to generate good demand in the machinerymanufacturing segment. Metals, cements and textiles are amongst the segments which arelikely to post significant growth next year.
(B) Opportunities and threats
a. Overall economic activity: With an expected GDP growth of around 8% in 2011 andgrowth in the industry and infrastructure services sector, the basic consumption driversfor lubricants remain intact and are all set to make the industry grow. We expect growthin the economy to impact directly the movement of goods and hence increase consumption ofcommercial vehicle engine oils.
b. Growth in personal mobility: Growing personal disposable incomes, double incomehouseholds and aggressive marketing by automobile manufacturers continue to drive demandfor passenger cars and two wheelers. Castrol has strong brand equity in these segments andgrowth in the personal mobility segment would have a positive impact on yourCompanys performance. The business in these segments, especially passenger cars, isdriven to a large extent by the workshop channel where superior service propositions,along with strong brands, can lead to significant business gains. It is also expected thatthe growth of four stroke motorcycle sales in rural markets will outstrip urban demand inthe foreseeable future. This trend presents both an opportunity as well as a challenge toyour Company.
c. Original Equipment Manufacturers: India is home to a vibrant automobile market.It has been one of the few markets worldwide which saw growth in passenger car sales evenduring the global downturn. In fact, 2010 has recorded the highest volumes ever in termsof vehicle production. While the Indian automobile industry seeks to double total sales onthe back of steady growth over the next decade, the relatively under-tapped demandsegments like rural markets, youth, women, luxury cars and infrastructure growth, areexpected to play a significant role. Castrol, with its strong relationships with global,Asian and local OEMs, is strongly poised to leverage this emerging boom in Indiasauto industry.
d. Changes in engine technology: OEMs are increasingly investing in new technologyin engine hardware as well as fuels and lubes. This is driven by increasing concerns onemissions and fuel economy. Additionally, with India emerging as an important export hubfor automobiles, manufacturers are rapidly upgrading technology to meet stringent Europeannorms. This is driving the lubricant market to low viscosity, synthetic lubricants.Castrol with its proven technology and marketing leadership is well poised to meet therequirements of high performance, technologically superior products and services.
e. Infrastructure growth: In the 2010 Finance Bill, the government announced thatit would significantly increase spending on various infrastructure projects. This movewill stimulate demand growth in the building and construction sector and thereby have apositive impact on lubricant demand.
f. Demand for automotive services: With the rapid pace of urbanization in thecountry, the consumer is increasingly becoming cash-rich and time-poor. As a result, thereis an emerging trend of movement from shop (retail buying of products) toworkshop (buying a full service package). To leverage this trend, your Companyhas greatly increased the number of Castrol BikePoints, Castrol Pitstops and Castrol CarCare centres which offer superior service solutions to vehicle owners.
In addition to the above, the rapid growth of vehicle population and penetration,especially outside the key urban centres, has meant that the market is now moregeographically dispersed than ever before. To address optimally this shift in marketcoverage trend, your Company had implemented a new initiative aimed at bettering its reachand availability to its consumers. This has led to the emergence of the CastrolAuthorized Service Associate or CASA concept, which reaches out to small individualmechanics.
g. Environmentally friendly products and services: With the governmentsincreased focus on emission control measures and any future growth in technology beingsubject to the requirements of lower carbon-footprint and emission control, your Companyis in an advantageous position. This is primarily due to our ability to have ready accessto Castrols global technology and products and services which are environmentallyfriendly and proven in markets across the world.
h. Association with sports: Castrol has historically been associated with varioussport sponsorships, as a means to connecting with its target audience. Ever since theinception of the Company, Castrol has built a strong association with motorsport and withrecord breaking feats on land, sea and air. Castrol extended its global sponsorshipactivities to football in 2008 and your Company leveraged this association during the 2010FIFA World Cup through a series of consumer promotion activities and advertisingcampaigns.
In October 2010, your Company became the Official Performance Partner of theInternational Cricket Council (ICC) for a period of five years, till the end of the 2015ICC Cricket World Cup. This is a strategic association and will go a long way in furtherstrengthening the Castrol brand equity in the fast growing categories of motorcycle andcar lubricants. The partnership will leverage Castrols existing property theCastrol Index for cricket, in a big way to lend credibility to its association with theICC as its performance partner. The Castrol Index offers analysis and insights which helpenhance the fans enjoyment of the game.
The ICC Partnership also leverages the deployment of your Companys other cricketassets, such as the Castrol Awards for Cricketing Excellence and the popular cricketwebsite - castrolcricket.com.
Your Company has also signed up with leading cricketers and commentators like SachinTendulkar, Brett Lee, Shakib Al Hasan, Harsha Bhogle and Ravi Shastri as its BrandAmbassadors.
The buoyancy in production of core industrial segments like automotive, machinerymanufacturing and metals is expected to continue. Rising income levels, increase inagricultural output, generation of fresh employment due to capacity additions and a likelycorrection in inflation is expected to increase purchasing power of Indian consumers andpush up demand for goods and services. Record capacity additions in the manufacturingsector will ensure that the industry does not face any capacity constraints in meeting therising demand.
Indian industry is expected to complete projects worth Rs.15 lac crores in the next twoyears. The largest contributor to the completion of the projects will be the power sector.The other sectors that will see a substantial amount of project commissioning aretelecommunication services, steel, road transport and allied services and petroleumproducts. The commissioning of fresh capacities across industrial sectors will enhanceproduction and will increase the demand for lubricants and allied services.
(ii) Threats Automotive sector a. Input costs: With crude oil prices pushing upcost of base oils, additives and packaging material, margins are expected to be underpressure during the year and potentially impact demand as the lubricant industry passes aportion of the increased costs to customers.
b. Competitive activity: The Indian lubricant market is highly competitive. Giventhe fact that most international players have identified India as a focus market, this islikely to intensify.
c. Longer oil drain intervals: This can significantly impact volume growth in themarket, especially in the commercial vehicle segment.
d. Price undercutting: In the Industrial sector, price undercutting by smallregional players and the tendency of PSU players to focus on volume rather than value, mayput your Companys margins and volume market share under pressure.
Your Company will focus on creating sustainable competitive advantage while continuingto invest in strengthening its Brand and Technology.
Non-Automotive sector a. Input costs: Manufacturing companies will continue to feelthe heat of rise in raw material prices and if not mitigated, this might impact the growthmomentum. Crude oil prices have been going up persistently. Higher base oil prices,coupled with increase in other raw material costs, are likely to impact input costsadversely.
b. Industrial growth: Whilst the manufacturing sector has recovered and is in thegrowth phase, the global situation may still impact its trajectory. Further, in spite ofrobust growth in the industrial environment, the focus on operational efficiency coulddampen the growth rate for lubricants.
(C) Segment-wise / Product-wise performance I. Automotive performance
In a challenging competitive environment, your Company delivered a stellar performancein the year 2010, with top line growth of 18% and a growth of 28% in operating profits inthe automotive segment. This was achieved through a continued focus on the high-growth andhigh-margin segments.
(i) Distinctive propositions
Castrol has always focused on meeting consumers needs by delivering distinctiveand diversified propositions through its brand portfolio. In 2010, Castrol launched itsglobal Product Brand Architecture in India for its Specialties range of products. Castrollaunched "Advance Performance Series" & "Protector Series" rangeof greases, gear oils and coolants, across different vehicle segments.
In line with our long-term strategy, our lead brand for two-wheelers CastrolActiv 4T was also upgraded to a superior formulation during the year. Castrol Activ4T which already enjoys enviable brand equity in the market, thereby further strengthenedits proposition of better all-round protection.
(ii) Diesel Engine Oils (Consumer Truck & Heavy Duty Vehicles)
A large scale communication program targeting micro-LCV commercial vehicle consumerswas implemented during the year. This program drove home the benefits of using Castrollubricants for vehicle maintenance.
We continued with our intensive tractor consumer contact program Sanjeevani,which has been highly successful. This program has been instrumental in reaching consumersnot only at the point of consumption but also in their own villages, thereby driving brandpreference and sales.
(iii) Motorcycle Oils (MCO)
The year 2010 has been a milestone year for the motorcycle engine oil category in yourCompany. Castrol Activ 4T continued to build its equity and gained momentum in the marketwith the launch of Secure Seal Cap + Improved Protection Formula. This launchwas supported by an integrated marketing program which included advertising, influencer(mechanic) engagement, market storming and dealer activation. Over 35000 mechanics wereeducated on the secure seal caps as an anti-counterfeit measure and on API SL technologyupgrade.
Castrol Power 1 gained a foothold as a mainstream brand, successfully leveraging the2010 FIFA World Cup sponsorship and brand association with Cristiano Ronaldo,through "Meet Ronaldo in Spain" Campaign. The Castrol BikePoint agenda continuedto expand with about 2000 BikePoints added during the year under review.
(iv) Passenger Car Oils (PCO)
In 2010, the passenger car oils segment continued its rapid growth trajectory. YourCompany accelerated its reach out to the mechanic community through innovative andengaging programs like the "Golden Spanner Mechanic Loyalty Program." Inaddition, recognizing the growing importance of the emerging synthetic segment, yourCompany initiated a unique dealer program called the "Synthetic Club", targetedat increasing market share.
The re-launch campaign for our lead brand Castrol GTX reached out to millions ofconsumers and influencers across all the channels, using an integrated communicationapproach which led to a strong growth of the brand.
During the second half of the year under review, your Company invested in CastrolMagnatec to enhance its share in the fast emerging synthetic segment. A new brand variantwas launched backed by mass media investment which further led to robust growth of thebrand and higher market share.
(v) Heavy Duty Channel (Transport fleets, Building & Construction and Mining)
During the year under review, the heavy-duty segment continued to grow in both volumeand value. This was enabled by the strong relationships and preferred partner status yourCompany enjoys with key OEMs and customers. During the course of the year, we strengthenedour offers and association with strategic accounts. We launched transport fleet managementsolutions "TRANSMART" consisting of superior products and servicesto support large fleets in the on-road customer segment. In line with our intent to takeadvantage of the booming infrastructure industry, we launched a series of products andservices like "Total lube management" for off road segment in Building &Construction and emerging Mining segment. With our association and commitment to jointlyworking with the OEMs in creating and delivering value to customers with new products andinitiatives, the performance of this segment in the coming years will continue to bestrong.
As the market for cars and motorcycles continues to grow impressively and manufacturersfocus on bringing in contemporary engine technology into the country, the significance ofthe workshop channel, especially the workshops affiliated to OEMs, is growing rapidly.Your Company continues to focus on being ahead of the curve as the market transitions from"shop" to "workshop".
Your Company has leveraged its local partnership with market leading OEMs such asMaruti Suzuki and Tata Motors, to consolidate its position in the workshops affiliated tothese OEMs. This has resulted in impressive volume growth in the business. WithCastrols global partners such as BMW, Jaguar Land Rover, Ford and the VolkswagenGroup scaling up operations in India, Castrol has seen a rapid growth in its premiumproducts which are co-engineered with these OEMs and sold exclusively within workshopsaffiliated to them.
II. Non-automotive performance
Industrial Lubricants and Services Business
The year 2010 was a very successful one for Castrol Industrial business. Your Companyconsolidated its position as the leading supplier of metal working fluids and highperformance lubricants which are technologically superior and deliver substantial value tothe customers.
With the introduction of new generation metal working fluids supported with technicalexpertise, your Company is jointly working with customers to add value to their operationsand deliver benefits, not only in terms of metal working fluid consumption but also interms of other costs associated with the processes like tooling cost, coolant sump life,machine down time etc. Your Companys endeavor is to address each of the costcomponents in the manufacturing process of the customer to reduce overall cost percomponent against mutually agreed timeline and on a sustainable basis.
Your Company is jointly working with a global company and a leading supplier of machinetools to a number of key industries aerospace, medical, automotive and machinerymanufacture, for providing manufacturing solutions and to develop new technology to meetcustomers needs.
In the manufacturing sector today, the pressure to minimize environment impact hasnever been greater. With a complete range of environment friendly products, yourCompanys emphasis is on helping reduce customers fluid usage and wastemanagement costs, while cost effectively meeting local compliance targets.
Marine & Energy Lubricants Business
The market environment in the Marine business was extremely challenging during 2010.Excess capacity coupled with slow down in cargo movement, continued to result in lowfreight rates. In the Offshore sector, while the shallow water jack up rig market ratesdecreased significantly, the deep water rig market continued to be attractive. Thecompetition in the market also intensified with the entrance of two new competitors inthis space.
Castrol Marine responded to the change in environment by revisiting its strategy as aresult of which your Company will now market the Castrol as well as BP Marine brands. YourCompany will also focus on new "route to market" initiatives during 2011. Thenew marine modular offer will also be piloted with Indian customers.
(D) Risks and Concerns
Key business risks are around the following areas:
a. Continued increase in drain intervals in the commercial vehicle segment
b. High levels of employee attrition
c. Reviving economy leading to inflationary pressure resulting in a sharp increase ofinput costs
d. Price under-cutting by low-cost as well as international competitors in an attemptto gain volume share
e. Hardening interest rates leading to slowdown in sale of commercial and personalmobility vehicles
Your Company has put together a plan to address the impact of the identified risks andhas put in place the necessary mitigating actions.
Automotive and Industrial advances and the demand for environment friendly products areplacing greater demands on lubricant technology. Your Company is well placed to seize theopportunities with its range of high performance lubricants both in automotive andindustrial sectors especially at the premium end of the market.
The journey on synthetics continues with strong product portfolios for OEMs and retailproducts, positively impacting sales. In the Industrial part of the business your Companylaunched various premium synthetic products under the Syntilo umbrella brand, that has ledto a larger share and greater profitability.
Several formulation optimization initiatives were undertaken jointly by the technology,supply chain and marketing teams, resulting in significant savings in raw material costsplus providing flexibility in formulations in times of short supply.
The Castrol Customer Engagement Centre that was set up last year to demonstrate Castrolproduct superiority and benefits, has started drawing a steady flow of visitors includingleading OEM engineers, customers and end users.
(F) Internal Control Systems and their adequacy
Your Company maintains an adequate and effective Internal Control system commensuratewith its size and complexity. We believe that these internal control systems provide,among other things, a reasonable assurance that transactions are executed with managementauthorization and that they are recorded in all material respects to permit preparation offinancial statements in conformity with established accounting principles and that theassets of your Company are adequately safe-guarded against significant misuse or loss. Anindependent Internal Audit function is an important element of your Companysinternal control system. The internal control system is supplemented through an extensiveinternal audit program and periodic review by management and audit committee.
(G) Health, Safety, Security and Environment
Health, Safety, Security and Environment (HSSE) is a core value of your Company. Simplystated, our goals are: no accidents, no harm to people and no damage to environment. Thehealth, safety and security of everyone who works for your Company is critical to thesuccess of the business.
Your Companys road safety program has been successfully running for the pastseveral years and is recognized as the benchmark on road safety initiatives in India. YourCompany has a driving behavior monitoring program in place for all its drivers includingthird party contractors. This has greatly helped improve driving behavior and in turn haspositively impacted your Companys road safety performance. This and other roadsafety programs undertaken by your Company, continue to be recognized externally, as wellas internally, within the BP Group.
The blending plants continued their strong safety performance. Two of our plants havebeen injury free for thirteen years and another one for ten years. One of the blend plantsachieved one year of zero first aid incident free performance. Two of the blend plantshave received awards from National Safety Council for consistent three year safetyperformance.
All the blending plants are certified for the Environment Management system (ISO 14001)and Occupational Health & Safety Management System (OHSAS 18001). These systems havebeen certified by accredited bodies recognized internationally. The blend plants have nowimplemented BPs Operating Management System (OMS) which is an enabler for enhancedsafety performance.
(H) Developments in Human Resources Management
During the year under review, development of leadership capability in your Companycontinued to be the key focus with greater emphasis on leadership behaviors and itsintegration with all people processes. A number of training and development initiativesdirected towards leadership development, like Ascent and Leading thecharge were undertaken during the year. Your Company continued its focus on buildingthe talent pipeline across all functions in the business.
During the year, your Company embarked upon building a diverse and inclusive workforceand focused its efforts in attracting, retaining and developing a talent pool whichreflects the diversity of the communities it operates in. As a part of the journey, weengaged senior leadership through a workshop to co-create the Business case for Diversity.This was followed by engagement workshops covering all our executives to sensitize and tocreate a common understanding of our diversity and inclusion agenda.
Your Company continued its focus on employee communication through engagement programs.Building the functional capability of our employees continued to be a key focus during theyear under review. Your Company embarked upon a number of initiatives to improve its brandas an employer to attract and retain talent in your Company and to realize its dream ofmaking your Company a great place to work.
During the year, your Company participated in the reputed "Great Places toWork" study and was rated amongst the Top 100 great companies to work for in thecountry. Your Company received the "Best Prax Compass Leadership Award" forstructured deployment of a best practice Individual Performance Management from Global Best Practice Network, a global organization which promotes benchmarking andsharing of best practices in organizations.
Our talent continues to be recognized within the BP Group and a number of employeesundertook overseas assignments during the year.
Your Company signed a long term wage agreement before the expiry of the subsisting wageagreement at its Paharpur blending plant. The agreement will be in force for a period of 4years and will benefit 41 bargainable employees. Our relations with our employeescontinued to remain cordial and peaceful during the year.
The total number of people employed in your Company as on 31st December 2010 was 792.
(I) Discussion on Financial Performance with respect to Operational Performance
Your Company delivered a significant increase in profits due to rigorous execution ofits long term strategy of "winning in lubricants". This has been achieved by"in year focus" on defending and growing margins, attacking cost inefficienciesand reducing working capital.
Sales realization in 2010 grew by 18% due to higher volumes, improved product mix andjudicious pricing. The total cost of material has increased by 23% due to higher volumesand increase in raw material costs. Margin improvement has been achieved through acombination of premium product mix and better sales realizations. Your Company continuesto invest strongly in costs which build value technology, brand, innovation, growthbusiness opportunities and people. We continue to focus heavily on safety in operations.This has led to a strong Profit after Tax (PAT) growth by 29%.
Higher profit after tax, partly offset by increased working capital (due to higher rawmaterial cost), has resulted in higher Cash flow for 2010.
The management team is confident that your Company has the ability to deliver asustainable winning performance going forward.
|On behalf of the Board of Directors |
|N. K. Kshatriya ||R. Kirpalani |
|Vice Chairman ||Director Automotive & |
| ||Chief Operating Officer |
|S. Malekar ||S. Vaidya |
|Director Supply Chain ||Director Finance |
|Mumbai || |
|Dated: 27th April, 2011 || |