MANAGEMENT DISCUSSION AND ANALYSIS REPORT
There was a slow but gradual improvement in demand since October 2011 leading toimproved capacity utilization. Raw material prices too remained largely stable aiding therecovery process. The Company was able to substantially cut down the losses due to bettercapacity utilization and stable demand.
a) Industry Outlook: There has been stability in the prices of cotton, theprincipal raw material and some improvement in demand. The worldwide slow down especiallyin Europe and USA has started affecting the growing economies of China and India also. Inspite of this the outlook for the industry is of optimism. The losses suffered in the pastand current year by the industry have seriously affected its financial position. This haseroded its competitive strength.
b) Opportunities : India has emerged as one of the largest producers of cotton inthe world. Though the current years' crop is expected to be marginally lower than lastyears' crop, total availability is expected to be adequate due to anticipated reduction inquantity of exports. Rising domestic demand due to higher disposable incomes and growth oforganized retail will benefit the industry.
The states of Maharashtra and Gujarat have announced attractive incentives forestablishment of textile industries in their states. This will give fillip to newinvestments in the sector.
c) Challenges : The industry faces huge disadvantage in terms of high interest costand power costs. There is acute shortage of power in certain regions resulting inproduction losses. There is also a serious shortage of skilled labour in the sector.Availability of migrant labour from labour surplus states/regions is decreasing. Underthese circumstances optimum capacity utilisation is big challenge. Training and retaininglabour force has become a focus area.
d) Product Analysis & Review :
|Particulars ||Units ||Current Year ||Previous Year ||% Change |
|Production of Cotton Yarn/Fabrics ||Kgs ||58,97,465 ||19,33,064 ||205.08 |
|Sales of Cotton Yarn/Fabrics ||Kgs ||59,73,029 ||23,14,178 ||158.10 |
|Average Realisation ||Rs /Kg ||182.93 ||178.46 ||2.50 |
|Average Cost of Cotton ||Rs /Ton ||1,02,040 ||1,31,410 ||-22.35 |
|Profit / (Loss) Before Interest but after Depreciation ||Rs in Lacs ||(119.39) ||(1532.47) ||-92.21 |
Note: Figures are not comparable as previous period figures are fo rsix months.
Review of Operations : Though strictly not comparable the operational figures forthe full year working do indicate a gradual return to normalcy. Production and capacityutilization are back to normal levels. Average realisations have improved marginally by2.50%, average raw material prices dropped by 22.35%. The improvements are quarter onquarter basis and expected to stabilize, giving hope for better performance in the currentyear. The current years' operations have resulted in losses of Rs 1030.50 lacs.
Company Outlook: The net worth of the Company was completely eroded due to lastyears' losses. Current years' losses have further added to the erosion. However thecapacity utilization and production are back to normal levels. In spite of expectations ofa marginally lower crop, raw material availability is expected to be comfortable andprices are expected to remain stable. The improvement in operational performance duringthe last year is expected to continue in the current year.
Risks & Concerns : Indian cotton prices are ruling higher than internationalcotton prices putting the industry at a disadvantage. The industry also faces a shortageof skilled workforce.
INTERNAL CONTROL SYSTEM AND ADEQUACY
The Company has adequate system of internal controls and necessary checks and balancesare introduced/ strengthened so as to ensure:-
a) that its assets are safeguarded.
b) that all transactions are authorised, recorded and reported properly.
c) that accounting records are properly maintained and its financial statements arereliable.
The significant findings, if any, are placed before the Audit Committee of the Boardand corrective measures are recommended for implementation. The Company appoints externalfirms of Auditors to conduct internal audit from time to time and their reports arereviewed by the management and Audit Committee.
The Company is an ISO 9001:2000 certified Company. The Company has a favourable workingenvironment that motivates performance, customer focus and innovation and adheres to thehighest degree of quality and integrity amongst employees. Industrial relations at theCompany remain cordial. Manpower employed with the Company as at 30th September, 2012 was539 compared to 540 as on 30th September, 2011.
The statements in this report describing the Company's policy, strategy, projections,estimation and expectations may appear forward looking statements within the meaning ofapplicable securities laws or regulations. These statements are based on certainassumptions and expectations of future events and the actual results could materiallydiffer from those expressly mentioned in this Report or implied for various factorsincluding those mentioned in the paragraph "Risks and Concerns" herein above andsubsequent developments, information or events.