elgi rubber company ltd merged Management discussions

ELGI RUBBER COMPANY LIMITED ANNUAL REPORT 2009-2010 MANAGEMENT DISCUSSION AND ANALYSIS Review of Operations and Future Outlook During the year under review, though sales has improved, the profits from operations has been lower. This is on account of higher raw material costs and higher depreciation on new equipment for expansion and for the manufacture of new products. The first quarter of the year saw unprecedented increase in raw material costs. However during the second half of the year the company was able to pass on raw material cost increase to customers which has considerably improved the bottom line. The sale of retreading accessories to corporate accounts continues to grow but at a very slow pace. The sale of these products through distributors has registered very high growth rates. The companys thrust area is overseas markets. High increase in polymer cost is driving the rubber industry to look for alternate/ recycled products. As a result, the growth in the reclaimed rubber sales is very encouraging. The company is actively looking at capacity expansion through new facilities or acquisition. The Company continues to maintain its debt free status. Risk and Concerns The company does not face any risk other than those that are prevalent in the industry. The company has taken all possible steps to overcome such risks. The main concerns are the volatility in raw materieal prices and fluctuations in foreign exchange. The company is taking measures that will enable it to pass on the part of raw material prices in tune with the competition. Foreign exchange fluctuation risk is minimized through proper planning and natural hedging. As a part of the overall risk management strategy, all assets are appropriately insured. Internal Control Systems Internal Audit is being done every quarter by an independent firm of Chartered Accountants and observations are reported to the management. Immediate steps are taken to rectify any discrepancies. All significant audit observations were discussed in the audit committee meetings. Human Resources and Industrial Relations The Company continues to enjoy a cordial relationship with its employees at all levels. The total strength of employees as on March 31, 2010 is 219. Cautionary Statement Statements in this report, especially those relating to MD & A giving details of companys objectives, projections, estimates and expectations may be construed as forward looking statements within the realm of applicable laws and regulations. Actual results are liable to differ materially from those either expressed or implied.