midland plastics ltd Directors report

MIDLAND PLASTICS LIMITED ANNUAL REPORT 2006-2007 DIRECTORS REPORT To, The Members, Your Directors are pleased to present the 23rd Annual Report together with the Audited Statement of Accounts for the year ended on 31st March, 2007. 1. Financial Results (Rs. In Lacs) Year ended on Year ended on 31.03.2007 31.03.2006 Sales & Other Income 2499.25 2153.27 Gross Profit/(Loss) before Interest and Depreciation (33.84) (47.38) Less: Interest 73.68 83.39 Depreciation 31.73 105.41 33.02 116.41 Net Profit/(Loss) (139.25) (163.79) Extraordinary incomes 6.78 30.08 Extraordinary expenses - - Provision for diminution in investments - - Prior period adjustments - (0.39) Revaluation Reserve adjusted with Depreciation 6.35 6.35 Fringe Benefit Tax (0.77) (0.70) Profit/(Loss) after tax (126.90) (128.46) Add: Balance transferred from: Debenture Redemption Reserve - - P&L A/c. brought forward (522.25) (393.79) Balance of Profit/(Loss) Carried over to next year (649.15) (522.25) 2. Review of Performance and Finances: The sales and other income for the financial year under review increased by 16% to Rs.2499.25 lacs as against Rs.2153.27 Lacs for the previous year. In spite of the improved performance, the company has incurred a loss of Rs.126.90 Lacs during the year as against loss of Rs.128.46 Lacs in the previous year. However, the loss before extra-ordinary income and current year debit of Rs.25.00 lacs as bad debts written off is Rs.115.25 lacs as compared to Rs.163.79 lacs in the previous year. The losses incurred in the past few years have eroded the working capital funds of the Company to a great extent and this has also affected the current working of the Company. The liquidity problem has been further compounded by abnormal increase in prices of polymers. The losses of the manufacturing division have been offset to some extent by income of Rs.13.49 Lacs earned by the consultancy division (Previous Year Rs. 29.23 lacs). Since the net worth of the Company had been completely eroded, the mandatory reference under section 15 (1) of the Sick Industrial Companies (Special Provisions) Act 1985 was met with the Board for Industrial & Financial Reconstruction (BIFR). The BIFR vide its order dated 24-5-07, declared the Company as a sick industrial company in terms of Section 3 (I) (o) of the Act. State Bank of India has been appointed as Operating Agency and asked to prepare a revival scheme for the company within two months. A comprehensive scheme for modernization and financial restructuring is being prepared and will be submitted to the Operating Agency. Your Directors are confident that with the implementation of the scheme, the fortunes of the company will reverse for the better. 3. Industry Structure, Opportunity & threats, risks & concerns: The Company is primarily engaged in the manufacture of HDPE/PP woven fabric, sacks and paper laminated sacks. The cement, fertilizer, sugar, rice and skimmed milk powder industry are the major consumers of the companys products. The demand for HDPE/PP woven sacks is restricted by the Government by the unjustified continuance of the Jute Packaging Materials (Compulsory use in packaging commodities) Act, 1987. The woven sack industry continues to be plagued by higher capacity and consequent low sale prices. The unbridled competition and various tax concessions available to units being set-up in states/areas like Uttaranchal, Himachal Pradesh, Kutch, etc. have also adversely affected the. sale prices. However, with the implementation of VAT tax by the Madhya Pradesh Government from April 2006, your companys competitiveness in Madhya Pradesh has improved vis-a-vis manufacturers of other states. The reduction in Central Sales tax to 3% will also have a positive impact on the Companys working. The boom in the cement and fertilizer industry and implementation of VAT are expected to have a positive impact on the working of the Company. 4. Dividend In view of the losses, your Directors regret their inability to recommend any dividend. 5. Internal Control Systems The Company has adequate internal control system commensurate with its size of operations with qualified and experienced personnel in various departments. 6. Conservation of Energy, Technology Absorption and Foreign Exchange Earning & Outgo: a) Conservation of Energy The Company places great emphasis on savings in the cost of energy consumption. Therefore, achieving reduction in the per unit consumption of energy is a continuous, ongoing exercise within the Company. b) Technology Absorption, Research & Development The Company is making continuous efforts to improve the quality and cost effectiveness of its products and reduce waste percentage etc. The technology used by the Company is updated as a continuous exercise. The Company does not have a separate Research & Development Centre but latest technical developments are being continuously monitored and implemented. The Company has not imported any technology. c) Foreign Exchange Earnings and Outgo: The details of foreign exchange earnings and expenditure on account of imports, expenses etc., are provided in Note Nos. 24,25 & 26 respectively of Schedule L. 7. Directors In accordance with the provisions of the Companies Act, 1956 and the Companys Articles of Association, Shri P.S. Kallani & Shri Bala Kumar Dibiru, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for reappointment. 8. Auditors The Auditors, M/s. Rathi & Company, Chartered Accountants, Gwalior retire at the ensuing Annual General Meeting and are eligible for reappointment. 9. Particulars of Employees under provision of Section 217(2A) of the Companies Act, 1956: During the period under review there was no employee drawing remuneration exceeding the limits specified under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended. 10. Listing: Shares of your Company continue to be listed with the Madhya Pradesh Stock Exchange, Indore and The Stock Exchange, Mumbai. Listing fee for the year 2006-2007 of the Mumbai Stock Exchange has been paid while the M.P. Stock Exchange is being requested to adjust the fee against the refundable security deposit of an associate company. The Shares of your Company were suspended for trading by BSE for certain inadvertent non-compliance with listing agreement. The Company is hopeful of the revocation of the suspension shortly. 11. Dematerialisation Your Company has provided the facility of holding shares in dematerialized form. As on the date of this report approximately 32.95% of the total shares of the company have been dematerialized. 12. Corporate Governance: A report on corporate governance pursuant to clause 49 of the listing agreement is annexed to this report. 13. Auditors Report: The Company has taken a policy for management of the companys Gratuity liability with Life Insurance Corporation of India. However, because of mass resignations in the last two years, the accumulated gratuity fund has been depleted to a great extent. Your Directors propose to build up the balance in the fund with enhanced contributions in the coming years. The other observations made in the Auditors Report read with the relevant notes thereon are self-explanatory and hence do not call any further comments under Section 217 of the Companies Act, 1956. 14. Directors Responsibility Statement: The Board of Directors confirm that : i) in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure: ii) the selected accounting policies were applied consistently arid the Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2007 and of the loss of the Company for the year ended on that date; iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) the annual accounts have been prepared on a going concern basis. 15. Acknowledgement: Your Directors place on record their sincere appreciation for the assistance and co-operation received from the Companys bankers, State Bank of India. The Directors are grateful to Companys valued customers for the confidence reposed by them in your Companys products and various Government Authorities for their continued assistance and co operation. Your Directors also express their appreciation of the excellent contribution made by the employees in realizing corporate objectives. Malanpur, On Behalf of the Board, Dated : 17th July, 2007 (M.K.SABOO) Managing Director