MANAGEMENT DISCUSSION AND ANALYSIS REPORT
There has been a discernable improvement in economic and financial conditions in India.Industrial production is rebounding; consumers who held back on spending out of fear ofjob loss have begun to spend more freely as they see job creation begin to take hold.Improvement in global demand is generating a robust rebound in exports while the financialmarkets are in better shape as evidenced by the continued rally in equities. Thecollective impact of monetary and fiscal policies, as well as targeted structural measureshas been crucial in containing the effects of the global economic downturn on domesticeconomic activity. The business landscape has changed significantly in the past one year.The difficult economic scenario compelled companies to re-look at the manner in which theyconducted their businesses. Companies that demonstrated cost leadership without losingsight of the needs of the customers have emerged as true leaders in an economy that hasturned extremely price sensitive. New business models have emerged, as companies took thepath of innovation to stay tuned to customer needs and remain competitive. The crisis hasreinforced the importance of good risk management practices. With companies carrying overthe lessons of the past year into 2010, the expectation is that it will be a more matureIndia Inc that will emerge from the existing scenario.
Opportunities, Threats & Outlook
Newly added capacities of company are fully operational now. STML has established unitfor manufacturing recycled fibre, which expects to provide heavy value addition. State ofthe art technology added in ourfabric dyeing and garment unit have started showingresults. World leaders in knitted T shirts like Reebok and Adidas are outsourcing theirdemand from us and their orders are expected to increase significantly in near future. TheCompany has consolidated its position after capital investment in last few years.
Rising prices of yarn is posing threat for the garment sector, since the said priceincreased is not being absorbed in the garment prices.
In view of our quality products being supplied to high end customers, company expectsto increase its margins in coming future. Recycled fiber unit of company would also add tothe bottom line of the company.
Financial / Operational Performance
Supreme is manufacturer and exporter of cotton yarn, synthetic yarn, blended yarn,knitted fabric (both grey and processed) and knitted garments. During the year underreview, the Company's exports (FOB value) were to the tune of Rs.65.24 crore and accountsfor about 18% of company's revenues. The company has identified two segment yarn segmentand garments segment. The yarn segment comprises production of various types of yarn (fromcotton, man made fibres and blend thereof) and yarn processing activities. Garment segmentcomprises of knitted garments. Detailed segment wise performance is given in Notes to theaccounts attached in this Annual Report
Risk of rising pricing, fluctuation in foreign currency, change in Government policiesand changing demand pattern are some of the examples of risks being faced by companies.Company is taking adequate steps to mitigate such risk by buying raw material in bigquantities at lower prices, hedging its currency by forward booking, keep sharp track ofGovernment policies and by expanding its suppliers range.
Internal Control Systems and their adequacy
Supreme has a proper and adequate system of internal controls to ensure that all assetsare safeguarded and protected against loss from unauthorized use or disposition and thattransaction are authorised, recorded and reported correctly. The Company has internalcontrol system, which covers cost saving aspects, system and procedure improvement. Suchreports are regularly reviewed by the management and corrective measures are timely takenfor improving efficiency.
During the year under review, your Company continued its concern for development of itspersonnel through various training programmes. Besides, Management has laid specialemphasis on strengthening HR activities for all levels in the Organization. Industrialrelations during the year were cordial.
Corporate Social Responsibility
STML is fulfilling its Corporate Social Responsibility in true sprit. STML has a strongsense of Corporate Social Responsibility towards various stakeholders' viz. employees,shareholders, Government, customers, suppliers, competitors, society & environment.
Certain statements in this Management Discussion and Analysis describing the Company'sobjectives, projections, estimates and expectations may be 'forward-looking statements'within the meaning of applicable laws and regulations. Forward-looking statements areidentified in this report by using words like 'anticipates', 'believes', 'expects','intends' and similar expressions in such statements. Although we believe our expectationsare based on reasonable assumptions, these forward-looking statements may be influenced bynumerous risks and uncertainties that could cause actual outcomes and results to bematerially different from those expressed or implied. Some of these risks anduncertainties have been discussed in the section on 'Risk Management'. The Company takesno responsibility for any consequence of decisions made based on such statements, andholds no obligation to update these in the future.