chandan steel ltd Management discussions

CHANDAN STEEL LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS REVIEW OF OPERATIONS: The Company could achieve higher sales turnover during the year under review. The products of the company have been well received in the Indian and International market. The company registered a quantum jump of 24% in its exports (FOB). Export sales made by the company during the year was Rs. 167 crore (FOB) as against Rs.134 crore (FOB) in the previous year. In the era of globalisation the Company has marked its presence by achieving a good performance in terms of exports in the current year and your Directors are optimistic that the benefit of the said efforts will endeavour the Company to achieve the new milestone and the same would be substantially reflected in the coming year. The Company is upgrading its product mix, which finds usage in the engineering, aviation & industrial applications. NEW PROJECTS - INTEGRATION The outlook for the future is positive and the management is optimistic and expect good opportunities for the Iron and Steel companies. To explore the further opportunities, the Company, in tune with its ongoing development plans has undertaken following capital projects. - The Company has envisaged the installation of two Rolling Mills of size 20 and 10 in addition to the existing rolling mill of size 16 and 12 so as to cater the new export emerging market. - To add high value to its product, as a part of forward integration the company has started a state of the art technology wire drawing unit in the new premises in September, 2005. - As a part of cost saving measure, In addition to the existing wind mill of 1.25 MW capacity, the Company has installed one more windmill of 1.25 MW capacity to generate 26 lacs units /per annum in March, 2006 which would be utilised for captive consumption. These projects will contribute very high sales turnover and profitability. The Company is also in the process introducing more innovative value added products and enhancing their product mix with the higher capacities to cater the export market. Further to economies the scale of operation, the Company is in the process of identifying the cost reduction measures involved in various processes and initiate the cost reduction techniques accordingly. The above steps will augur a bright future for the company in terms of healthier growth rate in topline, export and bottomline. INTERNAL CONTROL SYSTEM The company has adequate internal control systems with appropriate control checks commensurate with its size and nature of business. These effective measures ensure efficient use and protection of all assets of the Company and also compliances with the policies, procedures and statutory requirements. All transactions are recorded in conformity with generally accepted accounting principles. The internal audit department regularly conducts review of the financial and operating controls in all areas of the Companys operation and significant issues, if any, are brought to the attention of the audit committee of the Board for necessary action. INSURANCE; The Assets of the Company have been adequately insured against the risk of fire, flood, riots, and malicious damages etc.