MANAGEMENT DISCUSSION AND ANALYSIS
Industry Structure and Development:
Jolly Board is the leading Brand Name in Soft Board used in interiors and packaging andas Expansion Joint in Construction Industries. Jolly Board is able to compete effectivelyin the local and international markets due to its renowned brand name andcompetitive price.
Opportunities and Threats:
The Company has been able to lower the cost of manufacturing by shifting out of Mumbaito Aurangabad and Sangli. The cost of Raw Material has come down due to proximity to Sugarmills. Cost of Labour is much lower at Sangli and Aurangabad than at Mumbai.
The Company owns land at Kanjur which has become a hub of development activities due toproximity to Central Railway network and city freeways. The Company has started leasingout its newly constructed offices.
The major threat is the slowdown in economy in Europe resulting in the manufacturersfrom European countries exporting to countries like India and in Middle-East and competewith our products in a big way.
Segment-wise or Product-wise performance:
Company is a single product Company and hence segment-wise or product-wise performanceis not provided.
The Companys product will enjoy a buoyant market as the thrust in infrastructureproject will continue to grow in India.
More and more IT hubs are under construction in India, which will require soft boardsmade by the Company.
As a policy, the Government is giving a major thrust to education specially ruraleducation. The schools and colleges have started consuming our products in substantialquantities.
The middle eastern market continues with their major infrastructure projects. Due totheir sandy soils and variation of ambient temperatures, consumption of Jolly BoardExpansion Joint has increased and Company continues to bag orders from various projects.This has resulted in increase in export sales.
Risks and Concerns:
The Company has only one product, and if competition increases then it would be an areafor concern.
The Company has no major competitor. However there are many small scale manufacturersin the country who benefit from lower cost and various incentives given to small scaleindustries by the Government.
The Companys products have also to compete with alternative products made fromplastic and petrochemicals.
The Company depends on coal for operating its boilers. The price of imported coalwitnessed an unprecedented increase, even the quality (calorific value) of coal isuncertain, coal having lower calorific value results in higher consumption cost.
Continued reduction of peak import tariffs by Government of India will expose theindustry to flood of imports and will significantly alter the fortunes of the Industry andthe Company.
Rise in rate of inflation will impact the profitability of the Company, since therewill be increase in prices of all inputs and cost of services, without matching increasein price for the Companys products.
The Companys raw material is bagasse which is sugarcane based. The availabilityand price of bagasse are dependant on the sugarcane crop and the monsoon. The availabilityand price of sugarcane bagasse is impacted by its use inter alia in Captive Power Plants.
A large portion of the Companys products is exported and hence a fall in exportmarkets has an impact on the Companys performance. The profitability of the Companyis influenced by strength and weakness of the Rupee.
Internal Control System and their Adequacy :
The Company has a well defined internal control system. The Fixed Assets register isfully updated. Purchase and other expenditure are fully streamlined. Reviews are done bythe audit committee. The present accounting system is online.
The operating ratios, inventory levels are better than industry parameters.
Discussion On Financial Performance with respect to Operational Performance:
The Company regularly benchmarks its production cost with its competitors especially inEurope and Far East. The Company is positively a low cost producer of soft board.
The Company has been able to reduce its financial charges to barely 1% of itsmanufacturing costs. The Companys products are quality oriented and have a goodbrand name and are the preferred choice of consumers especially in the export markets.
Human Resources and Industrial Relations:
Company continues to maintain healthy industrial relation in both the manufacturingunits.
Company can boast of a young and skilled workforce and staff who are well trained intheir respective jobs and are also multi-skilled.
Company is able to service both domestic and export market with short lead-time due tohigh productivity and good industrial relations in the plants.
With very competitive labour cost, Jolly Board continues to have an edge over theEuropean manufacturers.
Cautionary Statement of the Company:
Statements in this report on Management Discussion and Analysis describing theCompanys objectives, projections, estimates, expectations or predictions may beforward looking within the meaning of applicable security laws or regulations. Thesestatements are based on certain assumptions and expectation of future events. Actualresults could, however, differ materially from those expressed or implied. Importantfactors that could make a difference to the companys operations include global anddomestic demand-supply conditions, finished goods prices, raw material costs andavailability, changes in Government regulations and tax structure and other factors suchas litigation and industrial relations.
The Company assumes no responsibility in respect of forward looking statements hereinwhich may undergo changes in future on the basis of subsequent developments, informationor events.