INDUSTRY STRUCTURE AND DEVELOPMENT
Titanium dioxide (Ti02) finds use in a variety of industrial and consumer products suchas Paints, Rubber Products, Plastics, Paper, Textiles, Cosmetics, etc. Its extremewhiteness, perfect non-toxicity and chemicals inertness makes it an ideal choice as awhite pigment. This Chemical is available in two crystalline forms viz., Anatase andRutile, which are of much commercial significance. In Kilburn Chemicals Ltd., the Anatasepigment of various Grades customized for different end applications is produced by usingthe Sulphate Technology
India is one of the major producer of llmenite. Depending on the source of deposit,Titanium Dioxide content varies from 48% to about 60% which is extracted either throughthe chloride or sulphate process. There are three major producers of Titanium dioxide inthe country. Travencore Titanium Products in Kerala and Kilburn Chemicals Ltd in TamilNadu produce Anatase Grade Titanium Dioxide through the sulphate process whilst KeralaMinerals & Metals Ltd., also located in Kerala produces the Rutile grade of pigmentthrough the Chloride route. Total production in the country is estimated at around 60,000tonnes. All the three major producers are located in close proximity to the source ofsupply of llmenite in Kerala and Tamil Nadu. This helps to produce the pigment at optimalcosts to effectively compete in the domestic and global markets.
Ferrous Sulphate Hepta hydrate (FSH) another important chemical salt produced by thecompany as a bye-product finds extensive application as a micro nutrient, for watertreatment, soil amendment and for manufacture of iron oxide.
OPPORTUNITIES AND THREATS, TRENDS AND STRATEGIES
Ti02 is a speciality chemical with multiple product specifications. Growth inconsumption of Titanium Dioxide pigment has maintained long-term average rates of 3.1 %per annum and this growth rate is likely to be sustained over the current decade till2010. Use of Ti02 pigment in various grades of paint applications account for around 60%of the total consumption. Though various substitute products/pigments have been tried out,there is as yet no ideal competitive product to substitute TiO2 pigment usage. Besidesthere is also an increasing trend of shifting manufacturing bases from the more advancedglobal regions to the developing regions in Asia Pacific due to various stringentregulations on environment. This gives rise to fair opportunity for export growth.
The major threat to the company is the dependency on limited sources for its main rawmaterials of input viz. llmenite and Sulphuric acid. Further the industry is highlyutilities dependent and generates a fair amount of effluents requiring treatment involvinghigh treatment costs as also sizeable CAPEX.
Volatility of the Indian Rupee is also a threat for exports. These threats have in turnmade many a Anatase pigment producer unprofitable leading to closure of some of thesmaller inefficient producers. Substitution of Anatase Grade pigment by the Rutile gradeby users poses a real challenge for Companies like Kilburn who are dependent on theSulphate process of manufacture.
The strategy for future largely depends on the Company being able to transform itsoperation to be a low-cost producer of the pigment and flexibility of producing bothRutile and Anatase Grades of pigments. The Company is pursuing the said objective bytaking all necessary steps to optimize its cost of production, adhere strictly toenvironmental standards & controls and regular systematic investment in R&D.
The outlook for the Titanium Dioxide pigment industry is encouraging judging the wideapplication base and the growth potential of the end user industries like Paints, RubberPlastics, Paper etc. Besides, the Company is working aggressively on identifying newapplication opportunities in niche markets for better value addition. The Company is alsocontinually exploring avenues to increase exports to advanced markets. Besides, theCompany is pursuing its efforts towards further rationalization of its operations in termsof output volume, product cost and quality.
The Company's operations are subject to risks, which can impact business performance,essentially with regard to prices of basic materials of inputs viz. Sulphuric Acid, ScrapIron and fuel oils and steady supply of utilities, especially power. The Management isseized of assessing such risks and is taking appropriate timely measures to address thesame including fixing of Sales Price realization on a monthly basis.
INTERNAL CONTROL SYSTEM
The Company has adequate internal control procedures commensurate with its size andnature of business. The objective of these procedures is to ensure efficient use andprotection of the company resources, accuracy in financial reporting and due compliance ofstatutes and company polices & procedures. Checks & balances exist in the systemto ensure that all transactions are adequately authorized and reported correctly. Besides,Internal Audit is conducted at regular intervals to cover the key areas of operations. TheCompany has implemented an advanced ERP package, which aids close monitoring of InternalControl Systems.
HUMAN RESOURCES DEVELOPMENT
The Company's constant endevour has been to attract, retain and nurture human resourcesby developing a culture of values. The Company appreciates that human assets constitutethe driving force behind the Company's growth plans.
The Company, as on 31st March, 2010, had 191 employees on its rolls drawn from diverseacademic background suiting their job profiles. The Company continues to have goodindustrial relations with its employees. Many employees were sent for selected externaltraining programmes. Your company would like to record the whole-hearted support andparticipation received from the employees at all levels.
Statements in the Management Discussion and Analysis describing the Company's positionand expectations may be forward looking statements within the meaning ofapplicable securities laws & regulations. Actual results could differ materially fromthose expressed or implied. Important factors that a could make a difference to theCompany's operations include, among others, economic conditions affecting demand/supplyand price conditions in the market in which the Company operates, changes in theGovernment regulations, tax laws and other statutes and incidental factors.