e i dupont india pvt ltd Management discussions

E.I. DUPONT INDIA PRIVATE LIMITED ANNUAL REPORT 2006-2007 NOTES ON ACCOUNTS REVIEW OF PERFORMANCE / WORKING The total sales of the Company grew by nearly 14.60 for the year ending 31st March 2007 as compared to the previous financial year. During the same period the Profits before tax of the Company grew by 65.73%. As the Company continues to hold steadfast to its core values, the overall performance of the Company was found to be satisfactory. The DuPont Crop Protection business ended the year with a total business of Rs.287.40 crores in 2006-07 (including exports). DuPont Crop Protection business registered a small growth of 3% over the previous year 2005-06. Barring Indoxacarb , sale of all other products registered high growth in 2006-07. The business had put in place an aggressive portfolio diversification plan across Insecticides, Herbicides & Fungicides and across various crops. These strategies have helped - growing non-Indoxacarb portfolios substantially in 2006-07. Similarly, the new portfolio products under development should help business to be back on aggressive growth track in 2007-08 and it is expected to contribute to the revenue longer term by 2010-11 with substantially improved bottomline. Further, a diversified portfolio will provide substantial mitigation against seasonal uncertainties - future. In 2007 we added one new cotton herbicide called Pyrithobsc Sodium (Theme TM) in our portfolio. Year K08 should see introduction of Sugarcane Herbicide - Velpar K4TM , Rice Herbicide - Londax PowerTM, Fruits & Veges Fungicide - Equation Pro Tm and Soybean Herbicide - PanteraTM. Similarly, RynaxypyrTM - the latest discovery product for DuPont is slated for registration approval by 4th quarter of 2008 and is to be launched under the brand name CoragenTM as a liquid formulation in 2008 and FerterraTM as a granule formulation in 2009. DuPont Performance Coatings (DPC) delivered a significant improvement in its performance in the financial year 2006-07. Overall sales volume growth was 27% and sales value growth was 33%. The local manufacturing unit of DPC at Savli registered a phenomenal increase of 105% in production volume and contributed to a healthy sales volume growth of 86%and sales value growth of 174% in products manufactured within India. The presence of a local manufacturing unit has enabled DuPont Coatings Solutions segment within DPC to capture major customer accounts in automotive industry. The Colision segment of DPC maintained its growth path and continues to lead the market in the premium category. The Industrial Coatings segment had entered several new end user industry segments and gained a significant snare of business. However the overall gross margins of DPC had a decline of 8% due to increase in Cost of goods sold by 17%. To improve the margins, the business has undertaken several key initiatives which will result in price revision, restructuring of distributor margins, phasing out of low margin products, revamping the supply chain network to reduce distribution costs and aggressive reduction in variable & fixed costs. All these initiatives is expected to contribute to a substantial improvement in margins in the financial year 2007-08. To ensure that DPC sustains its aggressive growth in top-line, apart from the focus on existing business segments, DPC is expanding its economy products portfolio to improve its market share in the economy segment and also introducing a range of new products in the industrial coatings segment. All these initiatives is expected to ensure that DPC will continue to sustain and significantly improve its performance in the financial year 2007-08 & the years ahead. The Fluoroproducts business launched the DuPontTM Teflon@ generic coating for Consumer products in beginning 2007. This is a 2 coat, low cost offering, which caters to the un-branded non stick coating market. This market is expected to grow significantly faster than the branded market, due to developments in retail and the burgeoning markets beyond the top 10 cities. Isceon M049 (HFC), a zero ODP refrigerant which is replacement for R12 (CFC based) was launched after successful trials in India. R12 (having ODP potential) production in India is to be phased out in 2010 as per Montreal protocol. M049 will help the customers who have their equipments running on R12 to continue to use their equipment after 2010 also, as M049 has no phase out. DuPont Preferred Processors Network was launched in 2006. The objective is DuPonts stringent criteria of Best Manufacturing practices. DuPont will work with its Customers to find ways to meet replacement of Exotic Metals with Teflon(R). The DuPont Safety Resource Business (consulting) had 50% revenue growth and supported many new clients in India in this year. Clients started getting positive results by improved safety performance and operational discipline. The business expanded client reach to multiple segments of Indian Industry that included ACC & Ambuja Cement (Cement), Indian Oil, Cairn energy & British Gas (Oil & gas), IPCL and Reliance Industries (Petrochemicals), Tata Steel (Steel & Mines). Nonwovens business in India has been demonstrating promising growth. The business has made good progress in applications for Medical Devices Industry, Automobiles, Cleanrooms, Active agents and Agriculture products like Seeds. The Tyvek(R). application in the form of Envelope has helped Department of Post to reduce the number of rejects during the Rakhi season. In the forthcoming year to come by, Nonwovens would continue its focus on exploring other unique security applications like Currency, Certificates and Bio-metric cards. Engineering polymer resins achieved growth of 20% in the year ended 31st March 2007. We expect growth of >20% to continue in the current year. We discontinued Polycarbonate wef Jan 2007, where the margins were under pressure due to severe competition from other suppliers of the product from Singapore and Thailand availing the duty free import benefit. We have identified the Automotive and Indian Railways as strategic areas of Growth and are working on conversion of some critical applications from metal and rubber to Engineering polymer. We extend Design and Development support to key customers engaged in these industries in the process of such conversions. We implemented price increase across the board to compensate for the increase in the cost of feedstock and energy cost. During the year 2007, we expect 100% growth in the business of Hytrel with new programs getting commercialised in Railways and Extrusion industries, which will substantially improve our business. For the year 2007, we have plans to optimise the Distribution Channel, by making some important changes in the Business model. Due to this we expect the number of warehouses to reduce, which will help in inventory reduction and improve the management of inventory. Packaging & Industrial Polymers ( P&IP) participates with its specialty polymers for applications covering the following market segments : Construction, Consumer Goods, Cosmetic Packaging, Health Care Packaging, Industrial Goods, Food & Beverage Packaging , Foot Ware, Personal Care Packaging and Automotive. Polymers used in laminates for tooth paste & cosmetic tubes , multi-layer films for edible oil packaging, aseptic (Tetrapak) packaging, bitumen modification are foundation (core) for the business. Price improvement, product mix and customer segmentation enriched gross contribution in spite of rise in feed stock prices. Adhesive polymers in pipe coating, building panels and sealants for health care packaging are growth drivers for the business. Strong development activities are underway for future growth areas like Auto components, Wire & Cable , Foot Ware, health care packaging, lidding applications and retail packaging formats. HUMAN RESOURCES The Company has continued its initiative to recruit fresh talent from the leading campuses and thus continues to augment its rich pool of talent. COMMUNITY ACTIVITIES DuPont supports community sustainability efforts to improve the quality of life and enhance the vitality of the communities in which the company operates. Through financial contributions and the active volunteer participation of employees, DuPont provides support to programs and non- profit organizations that address one or more components of community sustainability, such as: * Social Progress -Increasing access to opportunity; helping children, youth and families; fostering understanding among community members; * Economic Success - Revitalizing neighborhoods; helping people achieve self-sufficiency; enhancing the quality of life and * Environmental Excellence - Providing leadership in enhancing and protecting the environment. The DuPont Community Fund and the DuPont Volunteer Recognition Awards - are at the core of our corporate giving effort. The two community sustainability programs which we plan to approve for 2007 are: Support to the Academy for Street and Working Children in Gurgaon, Haryana, run by the not-for-profit organization Humana People to People India. The academy is a rehabilitation and education program for under- privileged children who stay in slums and semi-slums in and around Gurgaon. The project aims to integrate destitute children and provide them the rights to life, health and education. Support to the local village community near the Company plant site at Savli, Vadodara, Gujarat, for the Education and Water program that proposes to provide a hygienic school environment and access to pure drinking water to the villagers. Company has also extended its support to the SOS Childrens Villages of Indias Family Strengthening Program and sponsor the welfare needs - for educational, nutritional and healthcare - for 14 SOS children at the SOS Childrens Village at Faridabad, near Delhi. The employees have also voluntarily raised funds to sponsor the welfare needs of 4 resident girl- children at the not-for-profit organization Prayas - Institute of Juvenile Justice - for education, medical facilities, clothing, recreation, food and shelter. Company has also been actively supporting the development of the socio- economic conditions of the local community in the surrounding villages in and around all its plant sites in the country, including Savli in Guajarat, Madurai in Tamil Nadu and Hyderabad in Andhra Pradesh.